ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337408059
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 4, Problem 12P
To determine
The market
Concept Introduction
Market equilibrium- The price and output combination where the quantity demanded equals the quantity supplied is known as the market equilibrium. Graphically it is the point of interaction of the
Market clearing price- The price at the market equilibrium is known as the market clearing price as any shortage or surplus existent at other prices are cleared or eliminated at this price.
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Students have asked these similar questions
1. What is the definition of quantity demanded? What is the definition of quantity supplied?
(a) At what point in a market determines the equilibrium price and quantity. Provide a
graph of a market in equilibrium. Explain why the equilibrium outcome will occur in
a competitive market with no outside intervention (From the government or another
source).
Assume gasoline is sold in a competitive market, the equilibrium price is $50 per barrel, and the equilibrium quantity is 1000 barrels.
(a) Using the numerical values above, draw a correctly labeled graph of the gasoline market and show each of the following.
(i) The equilibrium price
(ii) The equilibrium quantity
(b) At a price of $40 per barrel, will there be a surplus or a shortage in the market? Explain.
(c) Assume new oil wells are discovered. On your graph from part (a), show how this change will affect the equilibrium price and quantity in the market for gasoline.
(d) Assume instead there is an increase in the price of gasoline-operated automobiles. How will this change affect the market for gasoline? Explain.
(e) If both changes in part (c) and part (d) occurred simultaneously, what will happen to the equilibrium price and quantity of gasoline?
Assume gadgets are sold in a competitive market, the equilibrium price is $6, and the equilibrium quantity is 500 units.
(a) Using the numerical values above, draw a correctly labeled graph of the market for gadgets and show each of the following.
(i) The equilibrium price
(ii) The equilibrium quantity
(b) At a price of $8 per unit, will there be a surplus or a shortage in the market? Explain.
(c) Assume gadgets now become more popular. On your graph in part (a), show the effect of the increase in gadgets' popularity on the equilibrium price and quantity of gadgets.
(d) Assume instead there is an increase in the price of tin, a major input in producing gadgets. What will be the effect of an increase in the price of tin on the market for gadgets?
(e) If both changes in part (c) and part (d) occurred simultaneously, will the equilibrium quantity of gadgets increase, decrease, remain unchanged, or be indeterminate? Explain.
Chapter 4 Solutions
ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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Similar questions
- Assume gadgets are sold in a competitive market, the equilibrium price is $6, and the equilibrium quantity is 500 units.(a) Using the numerical values above, draw a correctly labeled graph of the market for gadgets and show each of the following.(i) The equilibrium price(ii) The equilibrium quantity(b) At a price of $8 per unit, will there be a surplus or a shortage in the market? Explain.(c) Assume gadgets now become more popular. On your graph in part (a), show the effect of the increase in gadgets' popularity on the equilibrium price and quantity of gadgets.(d) Assume instead there is an increase in the price of tin, a major input in producing gadgets. What will be the effect of an increase in the price of tin on the market for gadgets?(e) If both changes in part (c) and part (d) occurred simultaneously, will the equilibrium quantity of gadgets increase, decrease, remain unchanged, or be indeterminate? Explain.arrow_forward1. What is the equilibrium price in this market? 2. What is the equilibrium quantity in this market? 3. At a price of two dollars will there be a surplus or shortage of units in this market? 4. At a price of eight dollars how large of a surplus will there be in this market? 5. If the supply curve shifts to the right, will the price in this market rise or fall?arrow_forward(A) Given the following data on individual supply and demand, calculate the market supply and demand. (B) what is the equilibrium price? (C) supposed the current price is $4, at this price, how much of a shortage or surplus exists in gallons?arrow_forward
- 1. Using demand and supply analysis, illustrate how each of the following scenarios would affect the equilibrium price and quantity in the respective markets. The use of carefully labelled diagrams is required with an explanation. a. The introduction of a new technology reduces the cost of production for all firms in the computer market. b. A strong advertising campaign has caused the consumer to demand more Pepsi at every existing price. c. The passage of Dorian a category 5 hurricane destroys fifty percent of the carrot crop.arrow_forwardb) i. Draw a Demand and Supply diagram for Coffee Beans based on the demand and supply schedule below. Price ($/kg) Quantity Demanded (kg) Quantity Supplied (kg) 2 500,000 300,000 400,000 400,000 4 300,000 500,000 200,000 600,000 6 100,000 700,000 i. What is the equilibrium price and quantity of Coffee Beans? 3.arrow_forward1. The following table shows the demand and supply of goods X at various price levels in a market as follows: (a) Draw the demand and supply curves based on the table above. (b) What is the price level formed and the quantity of goods traded at equilibrium conditions. (c) What happens if the price is US $ 35? (d) What happens if the price is US $ 50?arrow_forward
- 6. The graphs below show four possible shifts in demand or in supply that could occur in particular markets. Relate each of the events described below to one of them. Panel (a) Panel (b) Price Price D₁ S₁ D₂ Quantity per period Panel (c) Quantity per period Price S₁ S₂ X D₁ Price Quantity per period Panel (d) S₂ S₁ D₁ S₁ Quantity per period D₁ 1. How did the heavy rains in South America in 1997 affect the market for coffee? 2. The Surgeon General decides french fries are not bad for your health after all and issues a report endorsing their use. What happens to the market for french fries? 3. How do you think rising incomes affect the market for ski vacations? 4. A new technique is discovered for manufacturing computers that greatly lowers their production cost. What happens to the market for computers? 5. How would a ban on smoking in public affect the market for cigarettes?arrow_forward1. (a) In most developing countries, there are long lines of taxis at the airport, and these taxis often wait two to three hours before getting a passenger. What does this tell you about the current price in the cab- service market relative to the equilibrium price? Show this graphically with demand and supply. (b) From part (a), if you were one of these taxi drivers waiting to pick up a passenger, and given that you don't like waiting for hours to get passengers (because time is money!!), what might you do?? Explain. 2. During the first snow storm of the season the one thing you cannot find in your garage is the shovel. As the ground collects snow, you start walking to the closest hardware store only to find out that the store has sold out all the shovels as many people walk home upset and empty-handed. What was the shovel price at the store in comparison to the equilibrium price of a shovel on that particular day? Explain your answer with a D-S diagram. 3. A 'drought simply is a…arrow_forward(Table: Equilibrium Price, Quantity) Refer to the table. If the supply curve for the product shifted to the right such that 20 more units of the good are supplied at every price, what is the new equilibrium price? P Qa 50 $10 30 12 45 35 14 40 40 16 35 45 18 30 50 $12 O $10 $14 $16arrow_forward
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