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  1. What effect will each of the following have on the demand for product B?
    a. Product B becomes more fashionable.

b. The price of substitute product C falls.

c. Income declines and product B is an inferior good.

d. Consumers anticipate the price of B will be lower in the near future.

e. The price of complementary product D falls.

f. Foreign tariff barriers on B are eliminated.

  1. What effect will each of the following have on the supply of product B?
    a. A technological advance in the methods of producing B.

b. A decline in the number of firms in industry B.

c. An increase in the price of resources required in the production of B.

d. The expectation that the equilibrium price of B will be lower in the future than it is currently.

e. A decline in the price of product A, a good whose production requires substantially the same techniques as does the production of B.

f. The levying of a specific sales tax upon B.

g. The granting of a 50-cent per unit subsidy for each unit of B produced.

  1. How will each of the following changes in demand and/or supply affect equilibrium price and equilibrium quantity in a competitive market; that is do price and quantity rise, fall, remain unchanged, or are the answers indeterminate, depending on the magnitudes of the shifts in supply and demand? You should rely on a supply and demand diagram to verify answers.
    a. Supply decreases and demand remains constant.

b. Demand decreases and supply remains constant.

c. Supply increases and demand is constant.

d. Demand increases and supply increases.

e. Demand increases and supply is constant.

f. Supply increases and demand decreases.

g. Demand increases and supply decreases.

h. Demand decreases and supply decreases.

  1. Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as follows:

Thousands
of bushels
demanded Price
per
bushel Thousand
of bushels
Supplied Surplus (+)

a.  What will be the market or equilibrium price?   What is the equilibrium quantity?  Using the surplus-shortage column, explain why your answers are correct.   

b. Graph the demand for wheat and the supply of wheat. Be sure to label the axes of your graph correctly. Label equilibrium price “P” and the equilibrium quantity “Q.”

c. Why will $3.40 not be the equilibrium price in this market? Why not $4.90? “Surpluses drive prices up; shortages drive them down.” Do you agree?

d Now suppose that the government establishes a ceiling price of, say, $3.70 for wheat. Explain carefully the effects of this ceiling price.
Demonstrate your answer graphically. What might prompt the government to establish a ceiling price

Type of service: Academic Paper Writing
Type of assignment: Coursework
Subject: Economics
Pages /words: 1/275
Number of sources: 0
Academic level: Freshman (college 1st year)
Paper format: MLA
Line spacing: Double
Language style: US English