Question

Directions: For each question, show what happens to Equilibrium price (P) and quantity (Q) using supply-demand analysis. Clearly state your conclusion (e.g., "equilibrium price increases, while equilibrium quantity decreases" using the short-hand " ^P and vQ"). Be sure to complete and correctly label your graphs.

Question 3:

Part A:

"Luddites" were a group of workers in England in the 19th century that went around destroying new, labor-saving machines because they saw the new technology as threats to their jobs (as indeed many times they were). Suppose a new political party in the U.S. was formed, called "The New Luddite Party," whose slogan was "A Simpler Life for All." Then suppose that the New Luddites swept into power, and successfully passed legislation that banned the use of robotics on automobile assembly lines. Everything else held constant, what would be the impact of this new policy on the equilibrium price and quantity of automobiles?

-> Insert graph

Conclusion:

Part B:

Suppose there is a technological advance in cotton production. What happens - ceteris paribus to the equilibrium price and quantity of cotton?

-> Insert graph

Conclusion:

Part C:

Suppose that beef and leather products are production complements. Ceteris Paribus, what is the impact on the equilibrium price and quantity of letter products if there is an increase in the price of beef.

-> Insert graph

Conclusion:

Answer 1