MICROECONIMICS
5th Edition
ISBN: 9781319372101
Author: KRUGMAN
Publisher: MAC HIGHER
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Question
Chapter 5, Problem 2QFT
To determine
Graphically, the effect of entry of Uber on incomes of taxicab drivers, under the assumption that Uber cars cannot pick up fares hailed from the street and that there are some people who prefer to hail cabs rather than use an app. How does the graph changes if that restriction is lifted?
Concept Introduction:
Substitute Good:
When a product can be used as an alternative to the other, it is called the substitute good. Substitutes may or may not be perfect. In case of perfect substitution one product performs exactly the same way that of the other. That is why in case of perfect substitutes if the
Since, Uber and taxicab are not perfect substitutes because of the assumption that Uber cars cannot pick up fares hailed from the street and that there are some people who prefer to hail cabs rather than use an app, entry of Uber will take away a portion of taxicabs demand thereby shifting the demand faced by the taxicab downwards.
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Refer to the attached Wk 3 Graph for this assignment. The graph shows an increase in demand (shifting of the demand curve from D1 to D2). Choose an application or situation in the economy or a specific economic situation to describe this graph. Take into consideration the impact on quantity and price in your analysis.
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Click on the link to study the Economics in the News. Then answer the following questions.
120-
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3. Use the AS-AD model to show the changes in aggregate demand and aggregate supply that occurred in
2016 and 2017 that brought the economy to its situation in mid-2017.
The graph shows the U.S. economy in the second quarter of 2016.
Draw and label the long-run aggregate supply curve in 2017.
Draw and label the aggregate demand curve in 2017.
Draw a point at the short-run macroeconomic equilibrium in the second quarter of 2017.
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Price level (GDP deflator, 2009=100)
LAS 16
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108-
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$16.7
100-
16.6
16.7 16.8 16.9 17.0
SAS 16
= SAS17
AD 16
17.1
17.2
17.3
Real GDP (trillions of 2009 dollars)
>>> Draw only the objects specified in the question.
LV
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Price level (GDP deflator, 2009=100)
Fed Raises Rates As Job Gains, Firming Inflation Stoke Confidence
The U.S. Federal Reserve raised interest rates on Wednesday. The rate rise was the second in three months.
This second rise comes in an economy that is growing faster and creating jobs at a more rapid pace. These
gains are accompanied by a rising inflation rate.
140-
130-
Source: Reuters, March 15, 2017
Describe the process by which the Fed's action reported in the news clip flows through the economy.
120-
...
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LAS
SAS
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When the Fed raises the interest rate,
A. aggregate demand decreases and short-run aggregate supply increases, and the price level falls
B. aggregate demand increases and real GDP increases
C. aggregate demand decreases and the price level falls
D. short-run aggregate supply increases and the price level falls
The graph shows the long-run aggregate supply curve and the short-run aggregate supply curve.
Draw the AD curve to illustrate the state of the economy…
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