Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 8TY
(a)
To determine
Construct a supply schedule.
(b)
To determine
Graph new supply curve.
(c)
To determine
Explain how the imposition of tax reduces the consumption of beef.
(d)
To determine
Explain whether the increase in price is greater than, equal to, or less than tax.
(e)
To determine
Explain who pays the tax, whether the consumer or producer.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Consider two markets: the market for waffles and the market for pancakes. The initial equilibrium for both markets is the same,
the equilibrium price is $6.50, and the equilibrium quantity is 35.0. When the price is $9.75, the quantity supplied of waffles is
57.0 and the quantity supplied of pancakes is 101.0. For simplicity of analysis, the demand for both goods is the same.
Using the midpoint formula, calculate the elasticity of supply for pancakes. Please round to two decimal places.
Supply in the market for waffles is
Ethanol, a fuel, is made from corn. Ethanol production increased 5.5 times from
2000 to 2008 and another 34% from 2008 to February 2013 (www.ethanolrfa.org).
What effect did this increased use of corn for producing ethanol have on the price
of corn and the consumption of corn as food?
1.) Use the line drawing tool to draw either a new demand curve (D2) or a new
supply curve (S,) that shows how the increased use of corn for producing ethanol
affects the market for corn as food, Properly label this line.
2.) Use the point drawing tool to indicate the new market equilibrium. Label this
point 'e2'.
Carefully follow the instructions above, and only draw the required objects.
What happens to the equilibrium price and equilibrium quantity of corn as food?
In the market for corn as food, the equilibrium price
V and the
D1
Q1
equilibrium quantity
Q, quantity of corn as food
...
$. price of corn
Identify the flaw in this analysis: “If more Americans go on low-carb diet, the demand for bread will fall. The decrease in the demand of bread will cause the price of bread to fall, The lower price, however will then increase the demand. In the new equilibrium, Americans might end up consuming more bread than they did initially.”
Chapter 4 Solutions
Economics: Principles & Policy
Knowledge Booster
Similar questions
- Good A (an inferior good) and Good B (a normal good) are viewed by consumers to be substitute products. Suppose that the price of Good B falls at the same time that consumer income increases. What is the net effect of these two events on equilibrium in the market for Good A? an increase in equilibrium quantity and an indeterminate effect on price a decrease in both the equilibrium price and quantity an indeterminate effect on quantity but an increase in price an increase in both the equilibrium price and quantityarrow_forwardThink about a retail product that you have purchased recently (e.g. groceries, restaurant meal, cotton T-shirt, leather shoes, etc.). Explain how the Law of Demand affected your purchase. Give specific examples of how your demand for this product was impacted by the five determinants of demand (T.I.P.E.N.). What might happen to your individual demand curve if any of these determinants change? Give examples of scenarios that would cause a change in demand versus a movement along the same demand curve (change in quantity demanded) for this product. Discuss the new equilibrium price and quantity that result from these changes.arrow_forwardTask 2: Answer the following: A=18 The following table gives the daily supply and demand for snacks at a sporting event: Price (R.O) Quantity demanded Quantity Supplied 2.000 400 3000 1.500 1000 2400 P (A + 500) – (2 × A)P (A + 300) + (4 × A)P 0.950 3240 5300 a. If the quantity demanded and supplied are equalized at P. Find the value of P. b. If the organizers of the sporting event decide to set the price at 1.500, how many snacks will be sold?arrow_forward
- Consider the following two equations for the demand and supply: Supply curve: Qs = 10 + 2P Demand curve: Qd = 30 − 12P (a) What is the value of the equilibrium price? (b) What is the equilibrium quantity? Suppose that clothes workers at a certain factory accept a pay cut of $3 per hour. (a) Draw a graph to show how this would affect the market for clothes. (b) Why does this shift occur? How does that affect the equilibrium price and quantity? Suppose that the price of product A increases from $10 to $19. As a result, quantity demanded for product B changes from 300 to 265. What can we say about products A and B? Explain.arrow_forwardQuestion 4 The demand for pancakes is given by Qd = 40 – 5P and the supply is given by Qs = 10P – 20, where P = price What is the equilibrium price and equilibrium quantity? The price for iPhones in Barbados has increased significantly. Demand for the cellular device has also increased. This is contrary to the law of demand. Do you agree or disagree? Explain your answer. Identify the flaw in this analysis: “If more Jamaicans become vegetarians, the demand for beef will fall. The decrease in the demand for beef will cause the price of beef to fall. The lower price, however, will then increase the demand. In the new equilibrium, Jamaicans might end up consuming more beef than they did initially.” Question 5 The total utility schedule of Sharon is given below for the number of shoes she consumes. Calculate Sharon’s marginal utility schedule. Plot a graph of total and marginal utility. What is the maximum number of shoes that Sharon will consume? Explain Number of Shoes…arrow_forwardIdentify the flaw in this analysis: “If more Bahamians go on a low-carb diet, the demand for pasta will fall. The decrease in the demand for pasta will cause the price of pasta to fall. The lower price, however, will then increase the demand. In the new equilibrium, Americans might end up consuming more pasta than they did initially.”arrow_forward
- Question Three In the market for Corn kenkey (INFERIOR GOOD), consumers’ income has decreased. In that same market, the prices of raw materials used for producing corn kenkey has also decreased. Using your knowledge in demand and supply, draw and analyse the effect of these simultaneous occurrences on the equilibrium price and quantity respectively if the magnitude of income decrease is smaller than the decrease in raw material prices.arrow_forwardThe following are market demand and supply equations for a perfume product:QD = 70 − 4PQS = 10 + 2Pwhere P is, QD and QS are quantity demanded and supplied of perfume, respectively. C) Suppose consumers’ income increases and perfume is considered as a normal good. As a result, the new demand equation is QD = 100 − 4P. Find the new equilibrium price and quantity of perfume. D) Your economist friend told you that because of the change in demand described in part (c), price elasticity of demand changed. Is your friend right? Explain. E) Use the demand equation in part (c) to compute price elasticity of demand between £5 and £6. Use the mid-point (arc) method.arrow_forwardQuestion 2 (1 point) Question 01: It's a hot day and Bert is thirsty. The below table shows the value, or "utility", Bert places on a bottle of water. Let's assume his "willingness to pay" will be equal to his "utility". c) If the price of a bottle of water falls to $2, how does the quantity demanded change? Compare this with your answer in part (a) – does the law of demand hold? (c) If the price falls to $2 Bert will buy just 1 bottle. The law of demand does A) not hold because there is a positive relationship between price and quantity demanded. (c) If the price falls to $2 Bert will buy only 2 bottles. The law of demand does B) not hold because there is no relationship between price and quantity demanded. (c) If the price falls to $2 Bert will buy 3 bottles, but not the 4th bottle as the happiness he would get from the 4th is less than the cost (price). The law of demand holds because there is a negative relationship between price and quantity demanded.arrow_forward
- a) Explain the effect of the increase of Coffee prices on the equilibrium price and equilibrium quantity of the tea. b) A student claims to have spotted a UFO over the desert outside of Dubai. How will his claim affect the supply (not the quantity supplied) of binoculars in Dubai stores? c) If we have an inferior good, explain the impact of the decrease in consumer's income on the demand of that good. d) How would each of the following affect the market supply curve for corn? 1. A new and improved crop rotation technique is discovered. 2. The price of fertilizer increasesarrow_forwardConsider the demand for shrimp shown in Figure 2. Suppose the current demand for shrimp is D (in black), the current price of a pound of shrimp is $10, and the current quantity demand for shrimp is 200K. Which of the following correctly describes the effect of a decrease in the price of a pound of shrimp? A) The price of a pound of shrimp falls to $3, the demand curve shifts left to D'' (red), and the quantity demand for shrimp remains at 200K pounds. B) The price of a pound of shrimp falls to $3, the demand curve remains at D (black), and the quantity demand for shrimp decreases to 150K pounds. C) The price of a pound of shrimp falls to $3, the demand curve shifts right to D' (blue), and the quantity demand for shrimp increases to 270K pounds. D) The price of a pound of shrimp falls to $3, the demand curve remains at D (black), and the quantity demand for shrimp increases to 270K.arrow_forwardChoose a good that you like and work through the methodology to construct a demand curve. Note: please think about the axes being the good that you really like as a composite of all other goods. Start by stating the assumptions you need to make to determine demand, and then show, using diagrams, how the demand for your good is determined. Be sure to explain it carefully and comprehensively. Then we would like you to construct consumer demand for a Giffen good diagrammatically—that is, a diagram that reflects that when the price increases, the quantity demanded also increases.show an understanding of the major differences between the good mentioned above and the Giffen good. What goods can you suggest that might demonstrate this difference? Explain your conclusions.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education