Question

Given the products below and the events that affect them, indicate what happens to demand, supply, equilibrium quantity, and equilibrium price in a competitive market. Identify the determinant of demand and supply that causes the shifts.

(a)       Calculators. More schools require students to buy and use calculators; improved productivity shortens the time it takes to make calculators.

(b)       Gasoline. Oil production declines due to a crisis in the Middle East; people take more car vacations and drive more.

(c)       New homes. The average incomes fall as the economy moves into recession; the productivity of home construction workers and builders increases.

(d)       Tobacco. The government cut its subsidy to tobacco farmers; more people quit smoking.

Answer 1

a) This will shift demand curve of the calculator to the right and the new equilibrium will be at a higher price and new equilibrium will be at a higher price and higher output in the market. and as the time of building one has also decreased the supply curve will shift to the right and the new equilibrium will be at a higher quantity and uncertain price.

b) This will shift the supply curve to the left and the demand curve to the right, the new equilibrium in the market will be at a higher price and uncertain quantity.

c) This will reduce the demand and shift the demand curve to the left and the supply curve to the right, the new equilibrium will be at a lower price and uncertain quantity.

d) This will shift the supply to the left and demand to the left, the new equilibrium will be at a lower quantity and uncertain price.