Question

lil Quantity ultimately decreases [Q'to Q'l (i] Price is ultimately indeterminate [P ?: the magnitude of the curve shifts determine whether price increases, decreases, or remains the same-while the diagram illustrates "equal" curve shifts, the context of the question provides insufficient information to determine the actual shift magnitudes]. la] Lumber market in North America "New house construction slows significantly in the United States. At the same time, changes in international trade agreements result in greater lumber imports into North America." Figure: 5 bl Market for new auto tires Automobile tire manufacturers experience an increase in the cost of raw rubber. At the same time, public transit fares le.g. bus fares) increase substantially" Figure: [l (cj Beef market concerns about the health effects from eating chicken cause an immediate shift in preferences toward beef. Greater subsequent demand for feed used to raise beef cattle gt g later date couses higher feed prices for beef cattle producers." Figure: d] Bubble gum market Sagging bubble gum demand and low bubble gum prices initially couse bubble gum existing producers to trim back their production. Eventualy many bubble gum producers leave the 25 7. Assigned Questions Figure 1 Figure 2 po D' Figure 3 Figure 4 s' Do Figure 6 Figure 5 Po D' Pl :94 indicates that quantity is indeterminate [i.e. while the diagram seems to indicate that Q' should be the same as O the fact that the magnitudes of the actual curve shifts are indeterminate mean that Q' is indeterminate) Figure 8 Figure 7 s' so indicates that price is indeterminate [i.e. while the diagram indicates that PI should be the same as po, shifts of demand and supply may not always be of exactly the same magnitude [i.e. of the same horizontal distance], making Pl indeterminate in most cases) Figure 9? Figure 10' S' Pl gure 9 differs from Figure 7 because Figure 9 assumes sequential shifting:; in other words, demand shifts at one t in time, then supply shifts at a later point in time. Figure 7 assumes simultaneous shifting: in other words and and supply shift at the same point in time. ure 10 differs from Figure 8 for reasons similar to those given in footnote 1. Figure 125 Figure 11 Figure 13 Figure 14 pl Figure 15 Figure 16 Figure 11 differs from Figure 7 for reasons similar to those given in footnote 1. Figure 12 differs from Figure 8 for reasons similar to those given in footnote 1. Figure 13 differs from Figure 6 for reasons similar to those given in footnote 1. Figure 14 differs from Figure 6 for reasons similar to those given in footnote 1. igure 15 differs from Figure 5 for reasons similar to those given in footnote 1 gure 16 differs from Figure 5 for reasons similar to those given in footnote 1. 23 7. Assigned Questions Figure 1 Figure 2 Di Figure 3 Figure 4 S' Pl Do Figure 5 s' Figure 6 D Do ie, while the diagram seems to indicate that Q should be the same as actual curve shifts are indeterminate mean that Q' is indeterminate) di indicates that quantity is indeterminate [i.e. 21 s Figure 7 Figure 8 PO Pl-? indicates that price is indeterminate [ie. while the diagram indicates that Pi should be the same as P, shifts of demand and supply may not always be of exactly the same Pl indeterminate in most cases]. magnitude [ie, of the same horizontal distancej, making Figure 9 Figure 10 9 assumes sequential shifting; in other words, demand shifts at one ta later point in time. Figure 7 assumes simultaneous shifting in other words, 2 Figure 9 differs from Figure 7 because Figure shift at footnote 1. Figure 10 differs from Figure 8 for reasons similar to those given in Figure 114 Figure 12 PO: P2? マーマー→ Q Figure 136 Figure 14 Figure 16 Figure 15 P2 Pl Po 4 Figure 11 differs from Figure 7 for reasons similar to those given in s Figure 12 differs from Figure 8 for reasons similar to those given in s Figure 13 differs from Figure 6 for reasons footnote 1 similar to those given in footnote 1. given in footnote 1, Figure 15 dfiffers from Figure s5 for reasons similar to those given in footnote 1. Figure 16 differs from Figure 5 for reasons those to those given in footnote 1. 23 1. Consider the market for natural wood flooring in Canada. For each of the events listed here, identify the figure above [i.e. Figures 1-16] which best represents the o wood flooring market. Hints: See pp. 76-8 Chapter 4 Student 1 in Chapter 4 of the course text book. See also Sections 4.2 and 4.3 in the Package, along with TYU Problems and Applications and their answers. Here is an example to help you understand the format of this question Example: Average household income increases in the notural wood flooring m Figure 1 fie. an increase in average household income shifts the demand for notural wood flooring to the right Tal The price of laminate flooring lan alternative flooring product) decreases. b] Machinery and labor associated r costs associated with natural wood flooring manufacturing increase. (c] Natural wood flooring retailers introduce low cost financing for all natural wood flooring purchases ld] Technological change lowers the cost of natural wood flooring manufacturing. 2. For each of listed events, identify the figure above [i.e. Figures 1-16] that best represents the stated outcome. In addition, In each case identify the ultimate impact on market equilibrium [ quantity and [ii] price generally expected given the course of events [indicate by stating either or "indeterminate"] Hints: See pp. 76-81 in Chapter 4 of the course text book. See also Sections 4.2 and 4.3 in the Chapter 4 Student Package, along with TYU Problems and Applications and their a nswers. Here is an example to help you understand the format of this question. Example: Farmed salmon market regulations reduced the number of firms provided farmed salmon. At simultaneous to the regulatory changel, the consuming public's opinion of the same time [i.e. the same time [i.e. farmed salmon declined." Figure: 8 Explanation: The reduced number of firms shifts the market shifter "num the left (demand shifter- "preferences"]. The events are indicates the events happened at the same time"]. Therefore, there -"A" and "B." Neither Figures the correct answer supply curve to the left [supply opinion shifts the market demand curve to simultaneous [note the question there are two equilibrium points 10 nor 12 are the correct answer, because they imply sequential f sellers."]. The decline in public Itaneous] events Inote these rgures have three equilibria, not two. Inot simultaneous) 24 UI Quantity ultimately decreases (Q to Q'l li] Price is ultimately indeterminate (P: the magnitude whether price increases, decreases, or remains the sates nsufficient "equal" curve shifts, the context of the question provide determine the actual shift magnitudes). of the curve shifts determine illustrates or remains the same- while the diagra a] Lumber market in North America construction slows significantly in the United States. At the same time greements result in greater lumber imports into North America." Figure: 5 i) (b] Market for new auto tires Automobile tire manufacturers experience an increase in the cost of row rubber. Atthe same time, public transit fares le.g. bus fares] increase substantially. Figure: fil fiij (c] Beef market Consumer concerns about the health effects from eoting chicken cause an immediate shift in preferences toward beef. Greater subsequent demand for feed used to raise a later date causes higher feed prices for beef cattle producers." beef cattle at Figure: i) (d] Bubble gum market low bubble gum prices initiolly cause bubble gum existing ging bubtbie back their production. Eventully many bubble gum producers leave the gum demand and low bubble trim producers to 25 industry." Figure: fil] 3. Because vanilla ice cream and strawberry sauce are often complements. are consumed together, they that the equilibrium price of vanilla ice cream has declined in the vanilla ice cream market. We also observe that the equilibrium strawberry sauce market quantity of strawberry sauce has declined in the What could be responsible for this pattern in the two markets: il an increase the price of vanilla extract (used to make vanilla ice cream], [ii] an increase in the price of raw strawberries [used to produce strawberry sauce], or ii] both [i] and [ij]? on Hint: Sketch separate market diagrams for ice cream and strawberry sauce. Consider the outcomes in each market if i] occurs, if [i] occurs, and if [ilij occurs. Which of the three is consistent with the observed price changes for vanilla ice cream and for strawberry sauce?

Answer 1

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