Question

1. In each of the following scenarios determine how the supply and/or demand curves will shift and state what will happen to equilibrium p and q. Also illustrate the changes with a graph.

a) Families begin having half as many children, on average, than they were having in previous generations.

b) Building rent, where many schools are located, increases.

c) The government begins to offer tax breaks to parents in order to offset the purchase of school supplies.

d) The price of uniforms decreases and the number of teachers entering the labor market increases.

Answer 1

1.a.

As the families begin to have less number of children, so the population of the region would be affected negatively. The growth rate of population would slow down. This would decrease the future demand for all the goods and services, in general. Thus, the demand curve would shift inwards to the left. The price and quantity both would decrease.

b. Building rent is an input cost of running the schools. If the cost of inputs increased, many schools might close down due to increased cost. This would reduce the supply of schools in the region. The price of schools would increase (fees) and the quantity would fall.

c. With the tax exemption from the government to the parents, the demand for school supplies would reduce. The demand curve would shift inwards to the left. The price and the quantity both would fall.

d. As the price of uniform decreases, more parents would now be willing to send their child to school as it becomes less costly. So the demand for schools would increase. The demand curve would shift outwards to the right. The price and quantity both would increase.

As the teachers entering the labor market increases, there is more labor force in the market. the supply curve of the labor market would shift out to the right. The price would reduce and the quantity would increase.