a. Explain why, in our model of an isolated market, the intersection of demand and supply curves
Question:
a. Explain why, in our model of an isolated market, the intersection of demand and supply curves may be thought of as an equilibrium.
b. Draw a diagram in which equilibrium arises without the intersection of demand and supply curves at a price of zero. Make your diagram large, label all curves and axes, and identify the equilibrium point. 2 1.6. Suppose you observed that in the market for wheat, 20 million bushels were sold during the first week in September for $1.00 per bushel, and that during the second week in September 25 million bushels were sold at a price of $1.25 per bushel. a. Construct a model of the market (not of consumer or firm behavior) to explain what happened. Be sure to state all of the assumptions you make. If you draw a diagram in your answer, make it large and label all curves, axes, and points.
b. Use your model to explain
(i) how price and quantity were determined each week and
(ii) why the price of wheat went up $.25 from one week to the next.
Macroeconomics Principles and Applications
ISBN: 978-1133265238
5th edition
Authors: Robert e. hall, marc Lieberman