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Exercises

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5 views

Exercises

Uploaded by

hannyhosny
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Explain using the graph and writing the complete data on the chart, and

using the four-step analysis, what will happen to market equilibrium:


1. Draw the Demand and Supply chart that represents the situation
before an economic event.
2. Decide whether the economic event being analyzed affects demand or
supply.
3. Determine whether the effect on demand or supply causes the curve to
shift to the right or the left, and plot the new demand or supply curve on
the chart.
4. Select the new equilibrium and then compare the price and quantity of
the original equilibrium with the price and quantity of the new
equilibrium.

1. There are two commodities, cheese and butter. Assume that there is
no cost to divert resources from cheese production to butter production
and vice versa. Suppose the demand for butter increases. What do we
expect to see in the market for cheese?
2. If the bread is an inferior good, what will happen in the market for
bread as the consumer's income increases?
3. The effect of changing consumer tastes against the commodity
accompanied by a decrease in the prices of its production inputs in the
same proportion on the equilibrium of a commodity market?
4. The effect of lower prices of production inputs, accompanied by a
higher increase than it, on consumers' incomes at the same time, on the
equilibrium of the commodity market?
5. The effect of technological progress in the field of commodity
production, accompanied by a smaller decrease in the prices of
alternative commodities for consumers, on the equilibrium of the
commodity market?
6. The effect of a large increase in the incomes of individuals and a
slight increase in production subsidies on the equilibrium of the
commodity market?
7. The effect of government intervention to impose a minimum wage in
the labor market?
8. If consumers expect an increase in the price of some commodities
next week, then we generally notice an increase in the price of the
commodity this week. Explain this fact using a diagram.
9. Suppose the government lowers personal income tax rates. Show
precisely how this will affect the market for air conditioners?
10. Suppose air conditioning workers accept a reduction in hourly
wages. How this will affect the market for air conditioners?

 The drought in the plain states has made grain, and therefore feed,
quite expensive. Many ranchers cannot afford to feed their cattle,
and have sold much of their herd for slaughter.
a. What will be the immediate effect of this event on the equilibrium
price and quantity of beef? Illustrate using a supply and demand
diagram.
b. Chicken and beef are substitute goods. Illustrate the effect that the
slaughter of the cattle herds will have on the equilibrium price and
quantity of chicken.
c. As it happens, the slaughter of beef cattle has coincided with a
decrease in consumers' income. Assuming that steak is a normal good
while hamburgers are an inferior good, use a supply-and-demand
diagram for either market to illustrate the combined effect of the two
aforementioned events on the equilibrium price and quantity of
hamburgers and steak.
 Here are the equations of the supply and demand equations:
Demand equation: D = 800 – 2p + 3pm,
Supply equation: S = 1000 + 8p – 10pf
Where (p) is the price of chicken, (pm) is the price of meat, and (pf) is
the price of poultry feed. The starting price of meat = 120 pounds, and
poultry feed = 50 pounds.
Mathematically determine the price and quantity of the initial
equilibrium of chicken, then determine the amount of change in the price
and quantity of chicken if the price of meat decreased to 100 pounds and
the price of poultry feed rose to 55 pounds. Explain with the diagram.

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