Question

Assume this is the market for pizzas. Our economy goes into a recession and as a...

Assume this is the market for pizzas. Our economy goes into a recession and as a result, consumer wages just decreased by 10% (demand factor) at the same time the federal government raises taxes on pizza producers (supply factor). What predictions can we make with respect to equilibrium price (Increase, Decrease or Can Not Tell) and equilibrium qty (increase,Decrease or Can not tell)?

Homework Answers

Answer #1

Price: Cannot tell

Quantity: Decrease

A fall in consumer income will lower demand, shifting demand curve leftward, decreasing both price and quantity of pizza. At the same time, higher tax on pizza producers lower their profitability, so producers lower production, decreasing supply. The supply curve shifts leftward, increasing price and decreasing quantity. The net effect is a definite decrease in quantity. But price may increase, decrease or remain the same on basis of whether the leftward shift in demand curve is lower than, higher than or equal in magnitude to the leftward shift in supply curve.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
If we find that our economy is in a recession, which of the following could the...
If we find that our economy is in a recession, which of the following could the Fiscal policy makers do to correct the situation? Decrease the money supply Reduce government spending Increase taxes Reduce taxes The marginal propensity to consume is typically: equal to one. often negative. between zero and one. greater than one. The income expenditure model predicts that if the marginal propensity to consume is 0.75 and the federal government increases spending by $100 billion, real GDP will...
During the Great Recession, consumer sentiment in the United States declined, leading to a decrease in...
During the Great Recession, consumer sentiment in the United States declined, leading to a decrease in consumer spending. Which of the following factors caused this decrease in consumer sentiment? a. an increase in tax rates b. a decrease in expected income c. a decrease in the money supply d. an increase in household wealth e. falling gasoline prices During the Great Depression, aggregate demand in the U.S. economy decreased. As a result, the unemployment rate _________ and the price level...
Suppose that the economy is at full employment (our economy has reached its potential GDP or...
Suppose that the economy is at full employment (our economy has reached its potential GDP or the maximum that we can normally produce). Now suppose that a world recession occurs (it decreases our exports). Which problem would we choose to combat? The decreased GDP The inflation We could choose to combat the decreased GDP or the inflation None of the answers is correct In 2013 the U.S. government removed its tariff on imported ethanol. Removing the tariff benefited ________ of...
Which of the following is likely to occur when the economy goes into a recession? A...
Which of the following is likely to occur when the economy goes into a recession? A general increase in deficit spending A general decrease in the national debt A general reduction in deficit spending A general increase in the interest rate level If the marginal propensity to consume is 0.9, then the government spending multiplier is: 10. 9. 0.1. 1.11. At the present moment, which of the following percentages is closest to the actual gross debt to GDP ratio for...
Governments to get the economy out of recession or cool the economy down when the economy...
Governments to get the economy out of recession or cool the economy down when the economy is overheating often use fiscal policy.   1. What is fiscal policy?   2. How can it be used to get the economy out of recession? 3. How can it be used to get the economy out of the situation where the economy is in an expansionary period where we exceed long run potential?   4. Do both situations result on different impacts on inflation? Why or...
Assume an economy operates in the intermediate range of its aggregate supply curve. For each of...
Assume an economy operates in the intermediate range of its aggregate supply curve. For each of the following changes in conditions, state the direction of the effect on: aggregate demand, aggregate supply, price level, real GDP. a) An increase in government expenditure in infrastructure b) A severe recession occurs in a country which has been a major importer of the nations exports. c) The federal government reduces business taxes
1. During a recession (downturn) in the economy firm lay off workers and the unemployment rate...
1. During a recession (downturn) in the economy firm lay off workers and the unemployment rate rises. During these times we can expect the demand for normal goods to ____ and the demand of inferior goods to ____. a.) decrease : increase b.) decrease : decrease c.) increase : increase d.) increase : decrease 2. You observe the price of a good rises and the quantity sold decreases. This is the result of a.) a decrease in demand b.) an...
Assume the economy is at a full-employment equilibrium. Now, if due to the pandemic, government increases...
Assume the economy is at a full-employment equilibrium. Now, if due to the pandemic, government increases spending to fight the virus, would this, ceteris paribus, be reflected as a change in aggregate demand or a change in aggregate supply? Explain. Be sure to clearly identify a textbook factor of AD or AS that is causing this change. Would this change be an increase or decrease? Explain.  Would this change result in the economy moving to a short-run below, or above, full-employment...
1. If a country has an economy where people can buy and sell freely, but the...
1. If a country has an economy where people can buy and sell freely, but the government sets some price restrictions and regulations then it likely has a________ economy. A. mixed market B. free market C. command 2. A decrease in the quantity supplied can result from A. a decrease in price. B. increased demand. C. a decrease in supply 3. An increase in the quantity supplied can result from A. decreased demand. B. an increase in price. C. an...
21. Suppose the economy is an inflationary gap. According to neoclassical economists, what will happen? Select...
21. Suppose the economy is an inflationary gap. According to neoclassical economists, what will happen? Select all that apply: A tight labor market will put upward pressure on wages, causing AS to shift to the left. Unemployment will put downward pressure on wages, causing AS to shift to the right. The economy will return to its potential levels of output. The economy will remain in the inflationary gap for a prolonged period. 28.)A shock to the economy, such as a...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT