ANSWER OF OF PAPER PRG SUPPLY AND DEMAND A SEVERETTE PIECE THE NECESSARY THIS LITEEL DIALER...

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ANSWER OF OF PAPER PRG SUPPLY AND DEMAND A SEVERETTE PIECE THE NECESSARY THIS LITEEL DIALER L 1. Over the past 20 years, technological advances have reduced the cost of computer chips. How do you think this affected the market for computers? For computer software? For typewriters? 2. A survey shows an increase in drug use by young people. In the ensuing debate, two hypotheses are proposed: Reduced police efforts have increased the availability of drugs on the street. Cutbacks in education efforts have decreased. awareness of the dangers of drug addiction. a. Use supply-and-demand diagrams to show how each of these hypotheses could lead to an increase in quantity of drugs consumed. b. How could information on what has hap- pened to the price of drugs help us to distin- guish between these explanations? 3. Beer and pizza are complements because they are often enjoyed together. When the price of beer rises, what happens to the supply, demand, quantity supplied, quantity demanded, and the price in the market for pizza? 4. Because bagels and cream cheese are often eaten together, they are complements. a. We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be responsible for this pattern-a fall in the price of flour or a fall in the price of milk? Illustrate and explain your answer. b. Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What could be responsible for this pattern-a rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer. 5. Identify the flaw in this analysis: "If more Americans go on a low-carb diet, the demand for bread will fall. The decrease in the demand for 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." PEROTICE PROBLEMS. 6. Ketchup is a complement (as well as a condi- ment) for hot dogs. If the price of hot dogs rises, what happens to the market for ketchup? For tomatoes? For tomato juice? For orange juice? Suppose that in the year 2010 the number of births is temporarily high. How does this baby boom affect the price of babysitting services in 2015 and 2025? (Hint: 5-year-olds need babysit- ters, whereas 15-year-olds can be babysitters.) 8. Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. (In fact, both the federal and state governments impose beer taxes of some sort.) a. Draw a supply-and-demand diagram of the market for beer without the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? b. Now draw a supply-and-demand diagram for the beer market with the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? Has the quantity of beer sold increased or decreased? Consider the following policies, each of which is aimed at reducing violent crime by reducing the use of guns. Illustrate each of these proposed policies in a supply-and-demand diagram of the gun market. a. a tax on gun buyers b. a tax on gun sellers c. a price floor on guns d. a tax on ammunition 10 Popeye's income declines, and as a result, he buys more spinach. Is spinach an inferior or a normal good? What happens to Popeye's demand curve for spinach? SOURCE: N. CHRECARY MAKIN Economics, 5TH EDITUM, 2009 A.. Hono 5/09 ANSWER OF OF PAPER PRG SUPPLY AND DEMAND A SEVERETTE PIECE THE NECESSARY THIS LITEEL DIALER L 1. Over the past 20 years, technological advances have reduced the cost of computer chips. How do you think this affected the market for computers? For computer software? For typewriters? 2. A survey shows an increase in drug use by young people. In the ensuing debate, two hypotheses are proposed: Reduced police efforts have increased the availability of drugs on the street. Cutbacks in education efforts have decreased. awareness of the dangers of drug addiction. a. Use supply-and-demand diagrams to show how each of these hypotheses could lead to an increase in quantity of drugs consumed. b. How could information on what has hap- pened to the price of drugs help us to distin- guish between these explanations? 3. Beer and pizza are complements because they are often enjoyed together. When the price of beer rises, what happens to the supply, demand, quantity supplied, quantity demanded, and the price in the market for pizza? 4. Because bagels and cream cheese are often eaten together, they are complements. a. We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be responsible for this pattern-a fall in the price of flour or a fall in the price of milk? Illustrate and explain your answer. b. Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What could be responsible for this pattern-a rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer. 5. Identify the flaw in this analysis: "If more Americans go on a low-carb diet, the demand for bread will fall. The decrease in the demand for 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." PEROTICE PROBLEMS. 6. Ketchup is a complement (as well as a condi- ment) for hot dogs. If the price of hot dogs rises, what happens to the market for ketchup? For tomatoes? For tomato juice? For orange juice? Suppose that in the year 2010 the number of births is temporarily high. How does this baby boom affect the price of babysitting services in 2015 and 2025? (Hint: 5-year-olds need babysit- ters, whereas 15-year-olds can be babysitters.) 8. Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. (In fact, both the federal and state governments impose beer taxes of some sort.) a. Draw a supply-and-demand diagram of the market for beer without the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? b. Now draw a supply-and-demand diagram for the beer market with the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? Has the quantity of beer sold increased or decreased? Consider the following policies, each of which is aimed at reducing violent crime by reducing the use of guns. Illustrate each of these proposed policies in a supply-and-demand diagram of the gun market. a. a tax on gun buyers b. a tax on gun sellers c. a price floor on guns d. a tax on ammunition 10 Popeye's income declines, and as a result, he buys more spinach. Is spinach an inferior or a normal good? What happens to Popeye's demand curve for spinach? SOURCE: N. CHRECARY MAKIN Economics, 5TH EDITUM, 2009 A.. Hono 5/09

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Technological Advances and Market Effects Computers The reduction in the cost of computer chips likely led to lower production costs for computers inc... View the full answer