Assume that the price in a market is currently below the equilibrium price. Explain exactly why...

Assume that the price in a market is currently below the equilibrium price. Explain exactly why that situation will change by putting the steps in the correct order. 1) the steps repeat until there is a new equilibrium 2) Some buyers are willing to pay more for a good and sellers can raise prices while still selling all of their supply 3) prices begin to rise 4) quantity demanded begins to decrease and quantity supplied increases 5) the shortage becomes smaller 6) there is a shortage since quantity demanded is greater than quantity supplied 7) a new equilibrium is reached with a larger quantity exchanged and a higher price

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Assume the government sets the price for a good below market equilibrium. Briefly explain what will...

Assume the government sets the price for a good below market equilibrium. Briefly explain what will happen to demand and supply and what kind of factors will determine the discrepancy between them. How will it affect the prices of substitutes? () *Use diagrams where relevant

Explain Market equilibrium, equilibrium price, and equilibrium quantity

1. Currently the market for coats has an equilibrium price of $50 and the market for...

1. Currently the market for coats has an equilibrium price of $50 and the market for buttons has an equilibrium price of $2. a) Suppose the price of zippers increases. Draw both the market for coats and the market for buttons. Explain how the change in the price of zippers affects the market for coats and buttons. Draw each market showing the changes you described and be specific about what happens to price in quantity in both markets (4 points)...

Assume a price floor is imposed in the market for milk at the current equilibrium price,...

Assume a price floor is imposed in the market for milk at the current equilibrium price, and that a price ceiling is imposed in the market for natural gas at the current equilibrium price. What will a decrease in demand for both milk and natural gas create? a. Shortages in both the milk and natural gas markets. b. Surpluses in both the milk and natural gas markets. c. A surplus in the milk market and a shortage in the natural...

Assume the market for gasoline is competitive: What is the market equilibrium price of gasoline?

Demand and Supply for GasolinePriceQuantity Demanded (in gallons)Quantity Supplied (in gallons)13,00012022,80016032,60020042,40024052,20028062,00032071,80036081,60040091,40044010120048011100052012800560136006001440064015200680Assume the market for gasoline is competitive: What is the market equilibrium price of gasoline?If the government imposes a $6/gallon tax on gasoline collected from sellers. After the imposition of the tax, what will be the new market price?If the government imposes a $6/gallon tax on gasoline collected from buyers. After the imposition of the tax, what will be the new market price?Assume that the government imposes a $6/gallon tax...

Assume that each of the markets below is initially in equilibrium. Then for each market below,...

Assume that each of the markets below is initially in equilibrium. Then for each market below, suppose that the indicated scenario occurs. Illustrate the effect of each event in a diagram and indicate the effects on the equilibrium price and quantity. Market: Rental homes. Scenario: Mortgages to own your own home are now easier to qualify for. Market: Beef. Scenario: A drought in Barbados has resulted in an increase in the price of cattle feed. Market: Bottled water in Indonesia....

Assume that the loanable funds market for the United States is currently in equilibrium. a) Draw...

Assume that the loanable funds market for the United States is currently in equilibrium. a) Draw a correctly labeled graph of the loanable funds market for the United States, and label the equilibrium interest rate as r* and the quantity of funds as QF*. b) Congress has decided to dramatically cut government spending over the next two years. i) What will be the impact of the policy action on the government's budget? ii) On your graph in part (a), show...

Suppose a market is in equilibrium at $10.00 and the price floor is established below the...

Suppose a market is in equilibrium at $10.00 and the price floor is established below the equilibrium at $6.00. Which of the following will happen? Select one: a. a surplus will develop b. a shortage will develop c. the quantity exchanged will rise d. the market will remain in equilibrium

1. If a price is above the equilibrium price, explain the forces that bring the market...

1. If a price is above the equilibrium price, explain the forces that bring the market back to the equilibrium price and quantity. If a price is below the equilibrium price, explain the forces that bring the market back to the equilibrium price and quantity.

Assume that an effective government-imposed price on a particular good. The price is set below equilibrium....

Assume that an effective government-imposed price on a particular good. The price is set below equilibrium. Now, the imposed price is removed. True, False, or Uncertain: Consumer spending on the good will increase only if demand is inelastic. Explain your answer.

Subjects