Question

1. Use either a shift in demand of supply to GRAPHICALLY represent each of the following situations. Also, label the graphs correctly and indicate the changes in equilibrium in each case.

1. Beef market:  Increases in the cost of cattle feed.
2. Air travel market: Reduced number of travelers due to Covid-19 pandemic.
3. SUV market: Reduced gasoline prices.
4. Smartphone market: Technology improvements reduced the cost of manufacturing smartphones.

Four separate graphs please.

2. a) How would economic contraction brought about by Covid – 19 slowdown be represented using production possibilities curve?

b) Repeat a) for improved technology which results in increased productivity?

3. Good                Quantity           Price in 1999                Price in 2000

X                      10                    $5                                $6

Y                      20                    $10                              $10

Z                      5                      $6                                $10

1. Calculate the market basket value for each year. What is the consumer price index in 1999?
2. What is the inflation rate between 1999 and 2000?

Show all calculations for full credit.

b) In a given year, there are 10 million unemployed workers and 120 employed workers the country of Landia. Calculate the unemployment rate in Landia.

120/10,000,000 = 0.0012%

1-0.0012 = 0.9988

0.9988*100 = 99.88

Unemployment rate = 99.88%

Show all your calculations for full credit.

Answer 1

A) Beef market:  Increases in the cost of cattle feed

This case has been depicted in figure 1. Cattle feed is an input that goes in the production of beef. If the price of input rises, this means it becomes less profitable for the producers to produce beef. So, the supply curve shifts to the left from S1 to S2. The equilibrium changes from E1 to E2, equilibrium Quantity changes from Q1 to Q2 and the equilibrium price changes from P1 to P2.

B)Air travel market: Reduced number of travelers due to Covid-19 pandemic.

This case has been depicted in figure 2. As the number of travelers falls due to pandemic, then the demand curve shifts from D1 to D2. The equilibrium changes from E1 to E2, equilibrium Quantity changes from Q1 to Q2, and the equilibrium price changes from P1 to P2.

c) SUV market: Reduced gasoline prices

This case has been depicted in figure 3. Gasoline is like a complement good for the consumers that they have to use with SUV. If the price of a complement reduces, this would lead to an increase in demand for SUV from D1 to D2. The equilibrium changes from E1 to E2, equilibrium Quantity changes from Q1 to Q2, and the equilibrium price changes from P1 to P2.

d) Smartphone market: Technology improvements reduced the cost of manufacturing smartphones

This case has been depicted in figure 4. As the cost is reduced, producers increase the supply of smartphones. The supply shifts from S1 to S2. The equilibrium changes from E1 to E2, equilibrium Quantity changes from Q1 to Q2, and the equilibrium price changes from P1 to P2.

As per the guidelines, the first four questions have to be answered. Thank you. Please put a thumbs up if you found this answer helpful.