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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- 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
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