Question

In: Economics

In each of the following cases, use a diagram to show which curve, supply or demand,...

In each of the following cases, use a diagram to show which curve, supply or demand, shifts, and explain how the market transitions to a new equilibrium price and quantity. Be sure to include both supply and demand in your diagrams.

•Tina Turner is a legend of R&B and soul music. Given her advanced age, she will probably die soon. What does this do to the market for Tina Turner collectibles and memorabilia?

•In November, 2015, a series of coordinated terrorist attacks occurred in Paris, France; 130 people were killed. How would this have affected the market for hotels in France?

•Steel workers unionize and negotiate for higher wages and safer working conditions.

•Overnight, half of the population of St. Catharines become millionaires. How does this affect Niagara’s fine dining industry?

•A government-funded public information campaign warns of the dangers of STIs.How will this impact the market for prostitution?

•In 1976, Pablo Escobar founded the Medellin Cartel, which ruthlessly murdered competitors, and ended up controlling 80% of the United States’ cocaine market.

Expert Solution

In each of the following graph, price (P) and quantity (Q) are shown along vertical and horizontal axes respectively. D0 and S0 are initial demand and supply curves, intersecting at point A. Initial equilibrium price is P0 and quantity is Q0.

(1)

Advanced age of the musician will increase the demand of her collectibles. Demand curve shifts to right, increasing price and increasing quantity. In following graph, D0 will shift rightward to D1, intersecting S0 at point B with higher price P1 and higher quantity Q1.

(2)

Terrorist attack will decrease the attraction of Paris as a tourist spot, thus lowering the demand for hotel stays. Demand curve shifts to left, decreasing price and decreasing quantity. In following graph, D0 will shift leftward to D1, intersecting S0 at point B with lower price P1 and lower quantity Q1.

(3)

Higher wage caused by effective unionization will increase production cost for firms, which will make firms reduce production, lowering supply. Supply curve shifts to left, increasing wage rate and decreasing quantity. In following graph, S0 will shift leftward to S1, intersecting D0 at point B with higher price P1 and lower quantity Q1.

(4)

Increase in income of consumers will increase the demand for fine dining. Demand curve shifts to right, increasing price and increasing quantity. In following graph, D0 will shift rightward to D1, intersecting S0 at point B with higher price P1 and higher quantity Q1.

NOTE: As per Answering Policy, 1st 4 questions are answered.

Rahul Sunny answered 1 year ago

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