Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 8, Problem 8.6IP
To determine
The effect of an increase in
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13. How shifts in demand and supply affect equilibrium
Consider the market for pens. Suppose that the number of students with an allergy to pencil erasers increases, causing more students to switch from
pencils to pens in school. Moreover, the price of ink, an important input in pen production, has dropped considerably.
On the following graph, labeled Scenario 1, indicate the effect these two events have on the demand for and supply of pens.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move
curve and it snaps back
to its original position, just drag it a little farther.
Given the following information about the supply of and demand for apples:
Price
Quantity demanded (per month)
Quantity Supplied (per month)
P 0.50
12,000
0
0.75
10,000
2,000
1.00
8,000
4,000
1.25
6,000
6,000
1.50
4,000
8,000
1.75
2,000
10,000
2.00
0
12,000
Plot the demand and supply curves, and determine the equilibrium price and quantity.
Assuming the market for apples meets the efficiency condition, show the equilibrium price and quantity that maximizes net benefit to society.
Identify the area of consumer surplus and the area of producer surplus.
Question 2 (5 marks)
No words allowed, only a diagram with annotations
To answer this question only a diagram with annotations is required.
Suppose apples and pears are substitutes in consumption. An outbreak of Grumpy Granny Smith fungus
has a devastating effect on the size of the apple crop. Show on a diagram how this will affect the market for
pears. Indicate how the equilibrium price and equilibrium quantity of pears will change. The direction of
any changes should be indicated using arrows.
S
hp
Please turn over.
FTSE jse 40
Chapter 8 Solutions
Managerial Economics: A Problem Solving Approach
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Similar questions
- Find the equilibrium price and quantityarrow_forwardSuppose that an early frost damages the Florida orange crop. As a result, the price of California oranges increases. Ceteris paribus, which one of the following statements best explains this situation? The supply of Florida oranges decreased, causing the supply of California oranges to decrease, which resulted in a higher price. The supply of Florida oranges decreased, causing their price to increase, and thus causing the demand for California oranges to increase. The supply of Florida oranges decreased, causing the supply of California oranges to increase, which resulted in a higher price. The demand for Florida oranges fell because of the freeze, and this led to a higher demand for California oranges.arrow_forward*3 ASAP Please! Gertrude loves both Wolverine Root Beer and Spartan Root Beer equally. What if she goes shopping and finds that the price of Wolverine Root Beer has increased by $2.00 relative to Spartan Root Beer. What effect will this have on her demand for Spartan Root Beer? Why? Use words and graphs to show what will happen in both the Wolverine and Spartan root beer markets (use separate graphs for each product).arrow_forward
- Which of the following scenarios would definitely cause the price of good or service to decrease? (Check all that apply.) decrease in demand; increase in supply increase in demand; decrease in supply increase in demand; increase in supply increase in demand; no change in supply decrease in demand; no change in supply no change in demand; decrease in supply no change in demand; increase in supply decrease in demand; decrease in supplyarrow_forwardQUESTION 9 9. Imagine a small bakery that produces two types of bread: Whole Wheat Bread (Good A) and White Bread (Good B). Both of these bread types require similar production processes and are considered substitutes in production. The bakery has been operating in a stable market until recently. The demand for Good A (Whole Wheat Bread) increases due to a health trend that promotes whole wheat products. As a result, the increase in demand for Good A shift the a) demand curve for good B rightward. b) demand curve for good B leftward. c) supply curve of good B rightward. d) supply curve of good B leftward. (4arrow_forwardThe equilibrium price in the market for jet skis is $5,500. In the Candlewood Lake area, there are two jet ski sellers, Junior's Jet Skis and Miller Water Sports. Junior's Jet Skis would be willing to sell a jet ski for $4,500. Miller Water Sports would be willing to sell a jet ski for $5,250. On Saturday, Junior's Jet Skis sells 1 jet ski and Miller Sports sells 2 jet skis. What is the total producer surplus for the two sellers on Saturday? Group of answer choices $750 $250 $500 $1,500 $1,250arrow_forward
- Find an article in The Wall Street Journal or The Economist that was published after 12/1/23 describing a change in price or quantity or both in some market. Analyze the situation using economic reasoning. A reference must be provided for the article Has there been an increase or decrease in demand? Factors that could shift the demand curve include changes in preferences, changes in income, changes in the price of substitutes or complements, or changes in the number of consumers in the market. Has there been an increase or decrease in supply? Factors that could shift the supply curve include changes in costs of materials, wages, or other inputs; changes in technology; or changes in the number of firms in the market. Draw a supply-and-demand graph to explain this change. Be sure to label your graph and clearly indicate which curve shifts. If done neatly, you can draw the graph by hand and paste it in your documentarrow_forwardQ2. The demand for tobacco is price inelastic. Suppose there is a drought that destroys a large portion of the tobacco crop. What will happen in the market for tobacco? Will the equilibrium price and quantity change? If so, how? What will happen to the total revenue earned by tobacco farmers? (GRAPH IS MANDATORY) (Explain IN 3-4 LINES ONLY) GRAPHarrow_forwardConsider the market for beer in the diagram below: Price (S) 70 60 50 40 30 20 10 D 100 200 300 400 500 600 700 800 900 1,000 Beer (millions of cases) Suppose demand shifts to the right by 200 million cases of beer. What would be the new equilibrium price and quantity of beer as a result of this increase in demand? $55 and 500 million cases of beer $65 and 500 million cases of beer $55 and 550 million cases of beer $60 and 600 million cases of beerarrow_forward
- #60arrow_forwardQuestion 2 In a discussion of tuition rates, a university official argues that the demand for admission is completely price inelastic. As evidence, she notes that while the university has doubled its tuition (in real terms) over the past 15 years, neither the number nor quality of students applying has decreased. Would you accept this argument? Explain briefly. (Hint 1: The official makes an assertion about the demand for admission, but does she actually observe a demand curve? What else could be going on? Hint 2: Think about the existence of potential substitutes.)arrow_forwardPlease answer asaparrow_forward
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