Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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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
Essentials of Economics (MindTap Course List)
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- Select the correct answer. A price ceiling will usually shift: demand supply both neitherarrow_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_forwardThe 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_forward
- 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_forwardConsider the graph at right. Assume that before any tax, firms were willing to supply 5 thousand pounds of lobster at a price of $50 per pound. Use the line drawing tool to draw a new supply curve reflecting a $30 per pound tax. Label this line 'STaxı Carefully follow the instructions above, and only draw the required object. (Enter all responses as whole numbers) The new price consumers will pay is $65 and the new price producers will receive is $ C Price 100- 95- 90- 85- 80- 75- 70- 65- 60- 55- 50- 45- 40- 35- 30- 25- 20- 15- 10- 5- -O 2 STax 3 4 5 6 Quantity (thousands) -∞ 8 S D 9arrow_forward
- G.237.arrow_forwardSuppose, the government has decided that the free-market price of sugar is too low. Government has imposed a binding price floor of per kg sugar at 50 taka, whereas, the market price was 40 taka per kg before the announcement. a. Explain the effects of this flooring price on the demand and supply of the sugar market. In your graph, show the effects of the price changes on quantity demanded and quantity supplied. Does it create excess supply or excess demand? What will happen to the market price? b. In the above situation, who (buyers or sellers) is going to get the benefit from such policy? Explain it in your own words (clue: use a graph where a Price flooring is binding).arrow_forwardConsider the graph at right. Assume that before any tax, firms were willing to supply 5 thousand pounds of lobster at a price of $50 per pound. Use the line drawing tool to draw a new supply curve reflecting a $30 per pound tax. Label this line 'STaxi Carefully follow the instructions above, and only draw the required object. (Enter all responses as whole numbers) The new price consumers will pay is $65 and the new price producers will receive is $ 35. The tax revenue that will be generated is $ Price 100- 95- 90- 85- 80- 75- 70- 65- 60- 55- 50- 45- 40- 35- 30- 25- 20- 15- 10- 5- 0+ 0 22 1 2 Stax 3 4 5 6 Quantity (thousands) 7 -o 8 S D 9arrow_forward
- Hello, please answer the attached question BR,arrow_forwardConsider the graph at right. Assume that before any tax, firms were willing to supply 5 thousand pounds of lobster at a price of $50 per pound. Use the line drawing tool to draw a new supply curve reflecting a $20 per pound tax. Label this line 'S Taxi Carefully follow the instructions above, and only draw the required object. (Enter all responses as whole numbers) The new price consumers will pay is $ and ……… Price 100- 95- 90- 85- 80+ 75- 70+ 65- 60- 55- 50+ 45- +3828== 40+ 35- 30- 25- 20+ dit 154 104 5- d 0- 0 1 2 7 3 4 5 6 Quantity (thousands) STax -00 8 S D Fox 9arrow_forwardSuppose demand is D and supply is S0. If a price ceiling of $6 is imposed, what are the resulting shortage and full economic price?Shortage: Full economic price:arrow_forward
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