EBK ESSENTIALS OF ECONOMICS
8th Edition
ISBN: 8220103599832
Author: Mankiw
Publisher: Cengage Learning US
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Question
Chapter 6, Problem 2PA
Sub part (a):
To determine
The impact of the
Sub part (b):
To determine
The impact of the price floor on the cheese market.
Sub part (c):
To determine
The impact of the price floor on the cheese market.
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Please answer a and b and explain the answers:
3. Consider the market for buko juice. In this market, the supply curve is
given by S = 10PJ -5PA and the demand curve is given by D = |
100-15PJ +10PT, where J denotes buko juice, A denotes buko, and T
denotes tea.
Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased.
(a) Draw a supply-and-demand diagram of the market for beer without the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers?
(b) Now draw a supply-and-demand diagram for the beer market with the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? Has the quantity of beer sold increased or decreased?
Chapter 6 Solutions
EBK ESSENTIALS OF ECONOMICS
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- A price ceiling will have the largest effect: substantially below the equilibrium price slightly below the equilibrium price substantially above the equilibrium price slightly above the equilibrium price Sketch all four of these possibilities on a demand and supply diagram to illustrate your answer.arrow_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_forwardThe government is interested in imposing a tax on the local gasoline market. Using a tax modified demand, indicate in an appropriate diagram the effect of this tax on this market, labeling everything. Explain what happens to demand, supply, equilibrium price and equilibrium quantity exchanged and why. please give me correct answer with proper explanation and diagramarrow_forward
- Help pleasearrow_forwardUse the following information to answer questions 17 and 18: Suppose Congress cuts personal income tax rates. 17) Draw a simple supply and demand graph to show how this would affect the market for refrigerators. 18) Why does this shift occur? How does that affect the equilibrium price and quantity? Explain.arrow_forwardSuppose that the government imposed a price ceiling on cows. Would you expect theprice of steak to increase, decrease, or stay the same? Explain your answer.arrow_forward
- The Organization for the Promotion of Brussels Sprouts has convinced the government of Ironia to institute a price floor on the sale of Brussels sprouts at $8 per bushel. Demand is given by:P = 9 – Qand supply by:P = 2Q,where Q is measured in thousands of bushels.Instructions: Round your answers to the nearest whole number.a. At market equilibrium, the price is $ per bushel and the equilibrium quantity is thousand bushels.b. With the price floor, the price is $ per bushel and the quantity sold is thousand bushels.c. The excess quantity supplied of Brussels sprouts produced with the price floor is thousand bushels.arrow_forwardThe figure below represents the market for Gasoline, where initially the equilibrium price was $5.60. The picture shows the effect of a $1.50 tax on gasoline. Using the information from the figure, what is the price elasticity of demand(Using the Midpoint method) when moving from equilibrium to the new demand after the tax?(Input the answer in absolute value and round it to 2 decimal places)arrow_forwardIf a price floor is lower than market equilibrium... a. Demand will be greater than supply and there will be a shortage b. Supply will be greater than Demand and there will be a surplus c. Demand will be greater than supply and there will be a surplus d. There will be no effect because the floor is lower than market equilibriumarrow_forward
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