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Chapter 3: Problem 15

This year, the small town of Middling experiences a sudden doubling of the birth rate. After three years, the birth rate returns to normal. Use a diagram to illustrate the effect of these events on the following. a. The market for an hour of babysitting services in Middling this year b. The market for an hour of babysitting services 14 years into the future, after the birth rate has returned to normal, by which time children born today are old enough to work as babysitters c. The market for an hour of babysitting services 30 years into the future, when children born today are likely to be having children of their own

Short Answer

Expert verified
Short Answer: The three different stages in time are: (a) this year, (b) 14 years into the future, and (c) 30 years into the future. During (a) this year, the demand for babysitting services increases, resulting in a higher market price and quantity of services provided. In (b) 14 years into the future, the supply of babysitters increases, causing the market price for services to decrease and the quantity of services provided to increase. Lastly, in (c) 30 years into the future, the demand for babysitting services increases again due to the baby boomers having their own children, leading to another increase in both the market price and quantity of services provided.

Step by step solution

01

Part (a): Babysitting services this year

First, draw the initial supply and demand curves for babysitting services on the market. Label them as D1 and S1. Now, since the birth rate has doubled this year, there is an increase in the demand for babysitting services. This causes the demand curve for babysitting services to shift to the right. Draw the new demand curve (D2). Due to the increase in demand, the market price for an hour of babysitting services also increases. Also, the quantity of babysitting services provided would increase, following the shift in demand.
02

Part (b): Babysitting services 14 years into the future

Start by drawing the initial supply and demand curves, D1 and S1. After 14 years, the children born when the birth rate doubled will be old enough to work as babysitters. This would imply that there is an increase in the supply of babysitters in the market. Draw a new supply curve (S2) to the right of S1, representing the increased supply of babysitters. Due to the increase in the supply of babysitters, the market price for an hour of babysitting services would decrease, and the quantity of babysitting services provided would increase.
03

Part (c): Babysitting services 30 years into the future

Draw the initial supply and demand curves, D1 and S1. After 30 years, the children born during the baby boom will likely have their own children. This would represent a new increase in the demand for babysitting services. Draw a new demand curve (D3) to the right of D1, representing the increased demand for babysitting services 30 years into the future. Due to the increase in demand, the market price for an hour of babysitting services would increase once again, and the quantity of babysitting services provided would also increase. In conclusion, the sudden doubling of the birth rate in the town of Middling had a significant impact on the market for an hour of babysitting services throughout different stages in time.

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Most popular questions from this chapter

Suppose that the supply schedule of Maine lobsters is as follows: $$ \begin{array}{c|c} \begin{array}{c} \text { Price of lobster } \\\ \text { (per pound) } \end{array} & \begin{array}{c} \text { Quantity of lobster } \\\ \text { supplied (pounds) } \end{array} \\\ \$ 25 & 800 \\\ 20 & 700 \\\ 15 & 600 \\\ 10 & 500 \\\ 5 & 400 \end{array} $$ Suppose that Maine lobsters can be sold only in the United States. The U.S. demand schedule for Maine lobsters is as follows: $$ \begin{array}{c|c} \begin{array}{c} \text { Price of lobster } \\\ \text { (per pound) } \end{array} & \begin{array}{c} \text { Quantity of lobster } \\\ \text { demanded (pounds) } \end{array} \\\ \$ 25 & 200 \\\ 20 & 400 \\\ 15 & 600 \\\ 10 & 800 \\\ 5 & 1,000 \end{array} $$ a. Draw the demand curve and the supply curve for Maine lobsters. What are the equilibrium price and quantity of lobsters? Now suppose that Maine lobsters can be sold in France. The French demand schedule for Maine lobsters is as follows: $$ \begin{array}{c|c} \begin{array}{c} \text { Price of lobster } \\\ \text { (per pound) } \end{array} & \begin{array}{c} \text { Quantity of lobster } \\\ \text { supplied (pounds) } \end{array} \\\ \$ 25 & 100 \\\ 20 & 300 \\\ 15 & 500 \\\ 10 & 700 \\\ 5 & 900 \end{array} $$ b. What is the demand schedule for Maine lobsters now that French consumers can also buy them? Draw a supply and demand diagram that illustrates the new equilibrium price and quantity of lobsters. What will happen to the price at which fishermen can sell lobster? What will happen to the price paid by U.S. consumers? What will happen to the quantity consumed by U.S. consumers?

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The accompanying table gives the annual U.S. demand and supply schedules for pickup trucks. $$ \begin{array}{c|c|c} & \begin{array}{c} \text { Quantity of } \\\ \text { trucks demanded } \\\ \text { (millions) } \end{array} & \begin{array}{c} \text { Quantity of } \\\ \text { trucks supplied } \\\ \text { (millions) } \end{array} \\\ \$ 20,000 & 20 & 14 \\\ 25,000 & 18 & 15 \\\ 30,000 & 16 & 16 \\\ 35,000 & 14 & 17 \\\ 40,000 & 12 & 18 \end{array} $$ a. Plot the demand and supply curves using these schedules. Indicate the equilibrium price and quantity on your diagram. b. Suppose the tires used on pickup trucks are found to be defective. What would you expect to happen in the market for pickup trucks? Show this on your diagram. c Suppose that the U.S. Department of Transportation imposes costly regulations on manufacturers that cause them to reduce supply by one-third at any given price. Calculate and plot the new supply schedule and indicate the new equilibrium price and quantity on your diagram.

The market for many goods changes in predictable ways according to the time of year, in response to events such as holidays, vacation times, seasonal changes in production, and so on. Using supply and demand, explain the change in price in each of the following cases. Note that supply and demand may shift simultaneously. a. Lobster prices usually fall during the summer peak lobster harvest season, despite the fact that people like to eat lobster during the summer more than at any other time of year. b. The price of a Christmas tree is lower after Christmas than before but fewer trees are sold. c. The price of a round-trip ticket to Paris on Air France falls by more than \(\$ 200\) after the end of school vacation in September. This happens despite the fact that generally worsening weather increases the cost of operating flights to Paris, and Air France therefore reduces the number of flights to Paris at any given price.
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