For each of the following scenarios, use a supply and demand diagram to illustrate the effect...

For each of the following scenarios, use a supply and demand diagram to illustrate the effect of the given shock on the equilibrium price and quantity in the specified competitive market. Explain whether there is a shift in the demand curve, the supply curve, or neither. (a) (5 points) An unexpected temporary heat wave hits the East Coast. Show the effect in the ice cream market in New England. (b) (5 points) The government introduces a tax on ice cream which is paid by producers. What is the effect in the ice cream market? (c) (5 points) China and Mexico are major producers of textiles. Workers in Mexico decide to go on strike. Show the effect on the market for Mexican textiles. (d) (5 points) Show the effect of the situation described in (c) on the market for Chinese textiles. (e) (5 points) Suppose the government imposes a price cap on bottled water. Show the effect in the bottled water market.

Expert Solution

a. A heat wave will increase the temperature in the East Coast. This will lead to an increase in the demand for ice creams which will shift the equilibrium price to P₁ and quantity shifts to Q_1. This means that the shift in demand will lead to an increase in both price and quantity.

b. When there is tax imposed which has to be paid by producers, this increases their cost of production. This will lead to a decrease in supply as producers are discouraged. This will lead to a leftward shift in the supply curve. This means that equilibrium quantity will reduce and equilibrium price will rise as shown in the figure. The new equilibrium price is P₁ and equilibrium quantity is Q_1.

c. A strike would mean that the supply will reduce. This means that the supply curve will shift to the left. This will lead to a reduction in equilibrium quantity and increase in equilibrium price. The new equilibrium price is higher as denoted by P₁ and the equilibrium quantity is lesser as denoted by Q_1.

d. Consumers will switch to buying Chinese textiles as Mexican textiles price has increased. This will then lead to a shift in the demand curve which will lead to an increase in the equilibrium price and quantity. This is denoted in the graph as P₁ and Q_1.

Rahul Sunny answered 2 years ago

In the scenario below, use a supply and demand diagram to illustrate the effect of the...

In the scenario below, use a supply and demand diagram to illustrate the effect of the given shock on the equilibrium price and quantity in the specified competitive market. Explain whether there is a shift in the demand curve, the supply curve, or neither AirAsia X (AirAsia’s long-haul, low-cost international carrier) defers delivery of 78 Airbus SE A330neo planes. Show the effect of this cancellation on Airbus planes’ demand. I want proper answers with evidence regarding the effects on AirAsia...

For each of the following scenarios, use a well-labeled diagram of the supply and demand for...

For each of the following scenarios, use a well-labeled diagram of the supply and demand for saving and investment to analyze the effects on the real interest rate, equilibrium national savings, and equilibrium investment. a) U.S. military involvement abroad declines. As a result, the government deficit shrinks. b) A new generation of computer-controlled machines becomes available. These machines produce manufactured goods much more quickly with fewer defects. c) Concerns about job security cause people to engage in more precautionary savings....

Question 5 (May -18) For each of the following scenarios, use a supply and demand diagram...

Question 5 (May -18) For each of the following scenarios, use a supply and demand diagram to illustrate the effect of the given shock on the equilibrium price and quantity in the specified competitive market. Explain whether there is a shift in the demand curve, the supply curve or neither An unexpected temporary heat wave hits Africa. Show the effect on the demand and price of bottled water The government introduces a tax on water which is paid by producers....

Use a supply and demand diagram for cars to illustrate the equilibrium price and quantity. Define...

Use a supply and demand diagram for cars to illustrate the equilibrium price and quantity. Define the equilibrium price and the equilibrium quantity. What happens if the price is above equilibrium? What happens when the price is below equilibrium? Relate the diagram to the law of demand. Relate the diagram to the law of supply. Be sure to refer to the diagram in your discussion.

Illustrate using the Aggregate Supply/Aggregate Demand diagram the effect of an expansionary monetary policy on economic...

Illustrate using the Aggregate Supply/Aggregate Demand diagram the effect of an expansionary monetary policy on economic output and price level. Indicate the new equilibrium level.

Use supply and demand curves to illustrate the impact of each the following separate events on...

Use supply and demand curves to illustrate the impact of each the following separate events on the equilibrium price and quantity of oranges. For each of the four situations, label your curves, axes, and the equilibrium prices and quantities, showing the coordinates of the equilibrium points on the axes. Also include a brief verbal explanation; state any assumptions you make. 1) A study finds that a daily glass of orange juice reduces the risk of heart disease. 2) The price...

3. Use the supply and demand model to illustrate how each of the following affects the...

3. Use the supply and demand model to illustrate how each of the following affects the market for cocoa beans, ceteris paribus. a. A blight on cacao trees kills of much of the crop in Latin America. b. The price of carob increases. c. Workers organize into a union and get higher wages for farming Cocoa. d. Chocolate is clinically proven to prevent Alzheimer’s disease. e. The price cocoa beans are expected to drop in the near future.

Demand and supply. Show in a diagram the effect on the demand curve, the supply curve,...

Demand and supply. Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price and quantity of each of the following pairs of events. a. The market for hand-sanitizers in New York at the beginning of April 2020. i. The number of Covid-19 cases increases exponentially starting from 1st March 2020; ii. On March 9, 2020 New York State Governor Andrew Cuomo allowed for state production of hand-sanitizers. b. The market for touristic services in...

9. Use the supply and demand model to analyze the effect of each of the following...

9. Use the supply and demand model to analyze the effect of each of the following events on nominal wages and employment in the relevant labor market. a) a decrease in the demand for salmon and the market for fishermen. b) an increase in the price of consumer products and the market for construction workers. c) an increase in crime and the market for police officers.

In each of the following cases, use a diagram to show which curve, supply or demand,...

In each of the following cases, use a diagram to show which curve, supply or demand, shifts, and explain how the market transitions to a new equilibrium price and quantity. Be sure to include both supply and demand in your diagrams. •Tina Turner is a legend of R&B and soul music. Given her advanced age, she will probably die soon. What does this do to the market for Tina Turner collectibles and memorabilia? •In November, 2015, a series of coordinated...

Question