Question
In: Economics
5. What would happen to the equilibrium price and quantity exchanged in the following cases? a....
5. What would happen to the equilibrium price and quantity
exchanged in the following cases?
a. An increase in income and a decreasing price of a
complement, for a normal good.
b. A technological advance and lower input prices.
c. An increase in the price of a substitute and an increase in
income, for an inferior good.
Solutions
Expert Solution
a) An increase in the income and decrease in the price of the complement will increase the quantity exchanged and price of the product. People will more income will demand more goods and due to a decrease in the price of complement, the demand will be even higher. This will increase the quantity demanded and the price of the goods.
b) This will increase the quantity demanded and the price will be lower. This changes will shift the supply curve to the right at a lower price and higher quantity.
c) An increase in the price of a substitute will increase the demand for the good but an increase in the income will decrease the demand for the same good. We have to evaluate the tradeoff between the increased income and increase in the price of the substitute. If income has increased more than the price of substitute the price of the good will fall and quantity demanded will decrease and vice versa.
Rahul Sunny answered 1 year agoRelated Solutions
Explain what will happen to the equilibrium price and equilibrium quantity of bonds in each of...
Explain what will happen to the equilibrium price and
equilibrium quantity of bonds in each of the following situations.
(If it is uncertain in which direction either the equilibrium price
or equilibrium quantity will change, explain why.)
Wealth in the economy increases at the same time that Congress
raises the corporate income tax.
A.The demand curve will shift to the left and the supply curve
will shift to the right. This decreases the price of bonds and the
quantity of...
38. Chapter 4 What would happen to the equilibrium price and quantity of peanut butter if...
38. Chapter 4
What would happen to the equilibrium price and quantity of
peanut butter if the price of peanuts went up, the price of jelly
(a complementary good) increased, fewer firms decided to produce
peanut butter, and health officials announced that eating peanut
butter was bad for you? Explain why.
a.
price will fall and the effect on quantity is ambiguous
b.
price will rise and the effect on quantity is ambiguous
c.
quantity will fall and the effect...
O1. What will happen to the market equilibrium price and quantity for the following situation? Explain...
O1. What will happen to the market equilibrium price and
quantity for the following situation? Explain your answer using the
graphs.
The effect of a decrease in incomes on the market for
secondhand vehicles
The effect of a governmental subsidy on the market for AIDS
research
The effect of a decline in the price of irrigation equipment on
the market for corn
The effect of a decline in the price of personal computers on
the market for software
The effect...
10. What will happen to the equilibrium price and equilibrium quantity for e-cigarettes if new studies...
10. What will happen to the equilibrium price
and equilibrium quantity for e-cigarettes if new studies show that
e-cigarettes cause lung cancer (all else being
equal)?
Equilibrium
price will increase, and equilibrium quantity will increase
Equilibrium
price will increase, and equilibrium quantity will decrease
Equilibrium
price will decrease, and equilibrium quantity will increase
Equilibrium
price will decrease, and equilibrium quantity will decrease
11. What will happen to the equilibrium price and
equilibrium quantity for a normal good...
Which of the following would cause both the equilibrium price and equilibrium quantity of potatoes (assume...
Which of the following would cause both the equilibrium price
and equilibrium quantity of potatoes (assume that potatoes are an
inferior good) to decrease?
an increase in consumer income
a freeze that sharply reduces potato output
a decrease in consumer income
a technological advancement that results in a bumper crop of
potatoes
Prices of Golden Eggs (assume that this is a normal good) have
risen steadily in recent years. Over this same period, prices for
regular eggs have dropped and...
In each of the following situations, list what will happen to the equilibrium price and the...
In each of the following situations, list what will happen to
the equilibrium price and the equilibrium quantity for a particular
product, which is an inferior good.
The population decreases and
productivity increases
The income increases and the price of inputs
increase
The number of firms in the market
decreases and income decreases
Consumer preference decreases and the price
of a complement increases
The price of a substitute in
consumption increases and the price of...
In each of the following situations, list what will happen to the equilibrium price and the...
In each of the following situations, list what will
happen to the equilibrium price and the equilibrium quantity for a
particular product, which is a normal good.
a. Price is expected to increase in the
future.
b.The number of firms in the market increases and income
increases.
c. The population increases and the price of inputs
increase.
d.The price of a complement increases and technology
advances.
e. Consumer preference increases and the price of a substitute
in production decreases.
A competitive market is in long-run equilibrium. If demand increases, what would happen to the price...
A competitive market is in long-run equilibrium. If demand
increases, what would happen to the price level, output level,
profits earned, and the number of firms in the market in the short
and long run when some resources used in production are only
available in limited quantities? Please show your answers with
diagrams.
What will happen to the nominal interest rate and the equilibrium quantity of money because of...
What will happen to the nominal interest rate and the
equilibrium quantity of money because of the following changes?
Draw a separate diagram (of the static liquidity-preference model)
for each case and explain. Label the diagram clearly. a) A decrease
in money supply. b) An increase in the level of prices
1. Consider a market with an effective price floor. What willhappen to the quantity exchanged...
1. Consider a market with an effective price floor. What will
happen to the quantity exchanged in the market if demand for the
product increases? The quantity exchanged will ______________.a increaseb decreasec not changed One cannot tell.2. If demand is elastic, should a producer raise or lower price
if the producer wants to increase total revenues?a The producer should lower prices.b The producer should raise prices.c It depends upon the elasticity of supply.d Neither change will increase revenues.3. A firm...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Non-constant growth model: Do=$2.00 required return on equity= 5% g= 9% n=1,2 g=7% n=3,4 g=3% n=5...
- . Find all x ∈ Z143 such that x2Ξ 7 (mod 143). Please explain all steps...
- #Python: A palindrome is a sequence of characters that reads the same backwards as forwards. For...
- Explain an example in which a variable has two different addresses at different places in a...
- Hadley, a thirty-five-year-old physician, has worked at Princeton Plainsboro Hospital for six years. She recently received...
- QUESTION 1. For each of the following, state whether the occurrence of the variable x occurs...
- According to Mike Taft of RVK, the “Markets Group” is an important unit of the Federal...
ADVERTISEMENT