Question

show in a diagram the effect on the demand curve(if applicable), the supply curve(if applicable), the equilibrium price, and the equilbrium quantity of each of the following events .Then state clearly what happens to the equilibrium price and quantity. a. the market for steel in the us. Fuel efficiency regulatons have reduced the use of steel in automobile production and increased the use of lighters materials such as aluminum, and (ii) import restrictions limit the amount of steel that can be imported to the US b. the market for international airline tickets. (i) incomes decline due to a recession, and (ii) norwegian airlines(whch flies to many places besided Norway) adds more us cities to its list of international flight destinations. c. the market for nurses. (i) many nurses who previously delayed retirement during the Great Recession have begun to retire, meaning there are more nurses exiting the workforce than entering, and (ii) hospitals want to wire more nurses due to increased health care utilization from the Affordable Care Act

Answer 1

In each case, D0 and S0 are initial demand and supply curves intersecting at point A with equilibrium price P0 and quantity Q0.

(a)

Fuel efficiency regulations decrease the demand for steel, shifting demand curve leftward, decreasing both price and quantity. Import restrictions will decrease supply of steel, shifting supply curve leftward, increasing price and decreasing quantity.

The net effect is a definite decrease in quantity. But price may increase, decrease or remain unchanged.

(1) Leftward shift in demand is more than the leftward shift in supply: Price is lower

In following graph, D0 shifts left to D1 and S0 shifts left to S1, intersecting at point B with lower price P1 and lower quantity Q1.

(2) Leftward shift in demand is less than the leftward shift in supply: Price is higher

In following graph, D0 shifts left to D1 and S0 shifts left to S1, intersecting at point B with higher price P1 and lower quantity Q1.

(3) Leftward shift in demand is equal to the leftward shift in supply: Price is the same

In following graph, D0 shifts left to D1 and S0 shifts left to S1, intersecting at point B with same price P0 and lower quantity Q1.

(b)

Lower income decrease the demand for air travel, shifting demand curve leftward, decreasing both price and quantity. Addition of new cities will increase supply of international travel, shifting supply curve rightward, decreasing price and increasing quantity.

The net effect is a definite decrease in price. But quantity may increase, decrease or remain unchanged.

(1) Leftward shift in demand is more than the rightward shift in supply: Quantity is lower

In following graph, D0 shifts left to D1 and S0 shifts right to S1, intersecting at point B with lower price P1 and lower quantity Q1.

(2) Leftward shift in demand is less than the rightward shift in supply: Quantity is higher

In following graph, D0 shifts left to D1 and S0 shifts right to S1, intersecting at point B with lower price P1 and higher quantity Q1.

(3) Leftward shift in demand is equal to the rightward shift in supply: Quantity is the same

In following graph, D0 shifts left to D1 and S0 shifts right to S1, intersecting at point B with lower price P1 and same quantity Q0.

(c)

Affordable care act will increase demand for nurses, shifting demand curve rightward, increasing both price and quantity. Increase in retirement of nurses will decrease supply, shifting supply curve leftward, increasing price and decreasing quantity.

The net effect is a definite increase in price. But quantity may increase, decrease or remain unchanged.

(1) Rightward shift in demand is more than the leftward shift in supply: Quantity is higher

In following graph, D0 shifts right to D1 and S0 shifts left to S1, intersecting at point B with higher price P1 and higher quantity Q1.

(2) Rightward shift in demand is less than the leftward shift in supply: Quantity is lower

In following graph, D0 shifts right to D1 and S0 shifts left to S1, intersecting at point B with higher price P1 and lower quantity Q1.

(3) Rightward shift in demand is equal to the leftward shift in supply: Quantity is the same

In following graph, D0 shifts right to D1 and S0 shifts left to S1, intersecting at point B with higher price P1 and same quantity Q0.