Question

2) For each of the following, determine if the statement is referring to a change in demand, change in quantity demanded, change in supply or a change in quantity supplied. If applicable, indicate the resulting change in the equilibrium price and quantity. Provide a graph and a brief explanation for each statement.

1. Prices of personal computers fall despite a substantial increase in the number sold

2. Apartment rental rates rise as student enrollment swells.

3. Lower airfares reduce the number of empty seats on regularly scheduled flights (Hint: There is a fixed supply of seats on regularly scheduled flights)

4. Increases in the price of Christmas trees cause trees to be planted on land previously used by dairy farmers (Note: Answer for both the market for Christmas trees and the market for milk)

5. In 1998 the ice storm that hit the province of Quebec not only impacted the market for portable generators in Quebec, but also in other regions of Canada.

Answer 1

1) Prices of personal computers fall despite a substantial increase in the number sold: Change (increase) in supply. This is likely to shift the supply curve to the right. Price will decrease while quantity will increase.

2) Apartment rental rates rise as student enrollment swells. Change (increase) in demand. As enrollment swells, more students start looking for rental accommodations so demand curve shifts right. This implies that number of rental apartments as well as rental rates are increased.

3) Lower airfares reduce the number of empty seats on regularly scheduled flights. Change (increase) in quantity demanded. As fair is decreased, more passengers request for seats and so the quantity demanded of seats increase

4) Increases in the price of Christmas trees cause trees to be planted on land previously used by dairy farmers. In the market for Christmas trees there is an increase in price so there will be a reduction in quantity demanded. This is change (decrease) in quantity demanded

In the market for milk, as less land is used now by dairy farmers, less is milk is produced. Hence supply decreases. This is change (decrease) in supply and so price of milk rises while quantity decreases

6) In 1998 the ice storm that hit the province of Quebec not only impacted the market for portable generators in Quebec, but also in other regions of Canada. This is change (increase) in demand as ice storm decreases temperature and raises electricity cuts so portable generators are more demanded. Price increases and quantity increases as demand increases.