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Chapter 1: Problem 8

Which of the following situations describes an equilibrium? Which does not? If the situation does not describe an equilibrium, what would an equilibrium look like? a. Many people regularly commute from the suburbs to downtown Pleasantville. Due to traffic congestion, the trip takes 30 minutes when you travel by highway but only 15 minutes when you go by side streets. b. At the intersection of Main and Broadway are two gas stations. One station charges \(\$ 3.00\) per gallon for regular gas and the other charges \(\$ 2.85\) per gallon. Customers can get service immediately at the first station but must wait in a long line at the second. c. Every student enrolled in Economics 101 must also attend a weekly tutorial. This year there are two sections offered: section A and section B, which meet at the same time in adjoining classrooms and are taught by equally competent instructors. Section A is overcrowded, with people sitting on the floor and often unable to see what is written on the board at the front of the room. Section \(\mathrm{B}\) has many empty seats.

Short Answer

Expert verified
If not, describe what an equilibrium would look like for each situation. Answer: Situation A is not in equilibrium. An equilibrium would see the side streets become congested as well, leading to equal travel times on both routes. Situation B is not in equilibrium. An equilibrium would likely involve a price decrease at the first station or an increase in waiting time at the second, leading customers to be indifferent between the two options. Situation C is not in equilibrium. An equilibrium would require some students to move from section A to section B, so that both sections have an equal number of students, and both classrooms have no overcrowding or empty seats.

Step by step solution

01

Situation A - Commute to Pleasantville

In this situation, we need to determine if the commuting pattern is in equilibrium. Currently, the highway takes 30 minutes but is congested, while the side streets take 15 minutes and seem to be less congested. An equilibrium would occur if the time spent on both routes would be the same, meaning that people are distributed evenly between the highway and side streets. As the times are not equal, this situation is not in equilibrium. An equilibrium would see the side streets become congested as well, leading to equal travel times on both routes.
02

Situation B - Gas Station Prices

In this situation, we need to determine if the distribution of customers between the two gas stations is in equilibrium. Currently, one station charges a higher price but has no waiting time, while the other has a lower price but a long line. An equilibrium would occur if customers are indifferent between the two options, meaning they would either switch stations depending on the trade-off they perceive between price and wait time. Since customers currently show a clear preference for one station, the situation is not in equilibrium. An equilibrium would likely involve a price decrease at the first station or an increase in waiting time at the second, leading customers to be indifferent between the two options.
03

Situation C - Enrollment in Economics 101 Tutorials

In this situation, we need to determine if the enrollment in the two tutorial sections is in equilibrium. Currently, section A is overcrowded while section B has empty seats. An equilibrium would occur if students are evenly distributed between the two sections with no preference for one over the other. Since the distribution is uneven, the situation is not in equilibrium. An equilibrium would require some students to move from section A to section B, so that both sections have an equal number of students, and both classrooms have no overcrowding or empty seats.

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