EBK ESSENTIALS OF ECONOMICS
8th Edition
ISBN: 8220103599832
Author: Mankiw
Publisher: Cengage Learning US
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Chapter 6, Problem 2CQQ
To determine
The impact of increased
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Price of
Gasoline
P3
P₂
P₁
0
9₂
9₂
52
D
S₁
Price Ceiling
Quantity
of Gasoline
Refer to the figure above. With a price ceiling present in this market, what will happen when
the supply curve for gasoline shifts from S₁ to S₂?
The market price will stay at P₁ due to the price ceiling.
A shortage will occur at the price ceiling of P2.
The price will increase to P3.
A surplus will occur at the new market price of P₂.
Government of Vacation Land is concerned about the increasing obesity rate in their country. To reduce the issue, they have proposed the following polices to reduce the consumption of soft drinks. Illustrate each of the proposed policies in a supply and demand diagram of the market ofsoft drinksa. A price floor on soft drinksb. A tax on soft drink consumersc. A subsidy to sugarcane framers that reduce sugar prices.
Chapter 6 Solutions
EBK ESSENTIALS OF ECONOMICS
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- What is the relationship between quantity Demanded and quantity supplied at equilibrium? What is the relationship when there is a shortage? What is the relationship when them is a surplus?arrow_forwardA low-income county decides to set a price ceiling on bread so it can make sure that bread is affordable to the poor. Table 3.11 provides the conditions of demand and supply. What are the equilibrium price and equilibrium quantity before the price ceiling? What will the excess demand or the shortage (that is, quantity demanded minus quantity supplied) be if the price ceiling is set at 2.40? At 2.00? At 3.50?arrow_forwardWhat is the effect of a price ceiling on the quantity demanded of the product? What is the effect of a price ceiling on the quantity supplied? Why exactly does a price ceiling cause a shortage?arrow_forward
- How can you locate the equilibrium point on a demand and supply graph?arrow_forwardIn a market where the supply curve is perfectly inelastic how does an excise tax affect the price paid by consumers and the quantity bought and sold?arrow_forwardTable 3.10 shows the supply and demand for movie tickets in a city. Graph demand and supply and identify the equilibrium. Then calculate in a table and graph the effect of the following changes. Three new nightclubs open. They offer decent bands and have no cover charge, but make their money by selling food and drink. As a result, demand for movie tickets falls by six units at every price. The city eliminates a tax that it placed on all local entertainment businesses. The result is that the quantity supplied of movies at any given price increases by 10%.arrow_forward
- The computer market in recent years has seen many more computing sell at much lower prices. What shift in demand or supply is most likely to explain this outcome? Sketch a demand and supply diagram and explain your reasoning for each. A rise in demand A fall in demand A rise in supply A fall in supplyarrow_forwardThe price of coffee rose sharply last month, while the quantity sold remained the same. Five people suggest various explanations: Leonard: Demand increased, but supply was perfectly inelastic. Sheldon: Demand increased, but it was perfectly inelastic. Penny: Demand increased, but supply decreased at the same time. Howard: Supply decreased, but demand was unit elastic. Raj: Supply decreased, but demand was perfectly inelastic. Who could possibly be right? Use graphs to explain your answer.arrow_forwardExplain why the following statement is false: In the goods market, no buyer would be willing to pay more than me equilibrium price.arrow_forward
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