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Chapter 3: Problem 4

Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price, and the equilibrium quantity of each of the following events. a. The market for newspapers in your town Case 1: The salaries of journalists go up. Case 2 : There is a big news event in your town, which is reported in the newspapers. b. The market for St. Louis Rams cotton T-shirts Case 1: The Rams win the Super Bowl. Case 2: The price of cotton increases. c. The market for bagels Case 1: People realize how fattening bagels are. Case 2: People have less time to make themselves a cooked breakfast. d. The market for the Krugman and Wells economics textbook Case 1: Your professor makes it required reading for all of his or her students. Case 2: Printing costs for textbooks are lowered by the use of synthetic paper.

Short Answer

Expert verified
The increase in journalists' salaries would lead to higher production costs for newspapers, resulting in a decrease in supply and causing the supply curve to shift to the left. The demand curve would remain unchanged, as the change in journalists' salaries does not affect the preferences of consumers. At the new equilibrium, the equilibrium price will increase, and the equilibrium quantity will decrease.

Step by step solution

01

Effect on Supply Curve

The increase in journalists' salaries will lead to higher production costs for newspapers, which will decrease the supply. Hence, the supply curve will shift to the left.
02

Effect on Demand Curve

The demand curve remains unchanged, as the change in journalists' salaries does not affect the preferences of consumers.
03

Equilibrium Price and Quantity

The new equilibrium will occur where the new supply curve intersects the untouched demand curve. Equilibrium price will increase, and equilibrium quantity will decrease. Case 2 : There is a big news event in your town, which is reported in the newspapers.
04

Effect on Supply Curve

The supply curve will remain unchanged, as the production cost doesn't change due to the big news event.
05

Effect on Demand Curve

The demand curve will shift to the right, as more people would be interested in buying newspapers to read about the big news event happening in town.
06

Equilibrium Price and Quantity

The new equilibrium will be where the new demand curve intersects the untouched supply curve. The equilibrium price and equilibrium quantity will both increase. b. The market for St. Louis Rams cotton T-shirts Case 1: The Rams win the Super Bowl.
07

Effect on Supply Curve

There will be no change in the supply curve as production costs remain the same.
08

Effect on Demand Curve

The demand curve will shift to the right, as people would want to buy more St. Louis Rams T-shirts due to the victory.
09

Equilibrium Price and Quantity

The new equilibrium will be where the new demand curve intersects the untouched supply curve. The equilibrium price and equilibrium quantity will both increase. Case 2: The price of cotton increases.
10

Effect on Supply Curve

The increase in the price of cotton leads to higher production costs, resulting in a decrease in supply. The supply curve will shift to the left.
11

Effect on Demand Curve

The demand curve remains unchanged since the preferences of consumers do not change.
12

Equilibrium Price and Quantity

The new equilibrium occurs where the new supply curve intersects the untouched demand curve. The equilibrium price will increase, while the equilibrium quantity will decrease. c. The market for bagels Case 1: People realize how fattening bagels are.
13

Effect on Supply Curve

The supply curve will remain unchanged, as there is no change in production costs.
14

Effect on Demand Curve

The demand curve will shift to the left, as consumers become less interested in buying bagels due to their realization of the fattening nature of bagels.
15

Equilibrium Price and Quantity

The new equilibrium will be where the new demand curve intersects the untouched supply curve. The equilibrium price and equilibrium quantity will both decrease. Case 2: People have less time to make themselves a cooked breakfast.
16

Effect on Supply Curve

The supply curve remains unchanged, as there is no change in production costs.
17

Effect on Demand Curve

The demand curve will shift to the right, as consumers will demand more bagels due to the convenience and time-saving aspect of not having to cook breakfast.
18

Equilibrium Price and Quantity

The new equilibrium will be where the new demand curve intersects the untouched supply curve. The equilibrium price and equilibrium quantity will both increase. d. The market for the Krugman and Wells economics textbook Case 1: Your professor makes it required reading for all of his or her students.
19

Effect on Supply Curve

The supply curve remains unchanged, as there is no change in production costs.
20

Effect on Demand Curve

The demand curve will shift to the right, as more students are required to buy the textbook.
21

Equilibrium Price and Quantity

The new equilibrium will be where the new demand curve intersects the untouched supply curve. The equilibrium price and equilibrium quantity will both increase. Case 2: Printing costs for textbooks are lowered by the use of synthetic paper.
22

Effect on Supply Curve

The decrease in printing costs leads to an increase in supply. The supply curve will shift to the right.
23

Effect on Demand Curve

The demand curve remains unchanged since the preferences of consumers do not change.
24

Equilibrium Price and Quantity

The new equilibrium will occur where the new supply curve intersects the untouched demand curve. The equilibrium price will decrease, while the equilibrium quantity will increase.

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Most popular questions from this chapter

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.

In recent years, the number of car producers in China has increased rapidly. In fact, China now has more car brands than the United States. In addition, car sales have climbed every year and automakers have increased their output at even faster rates, causing fierce competition and a decline in prices. At the same time, Chinese consumers' incomes have risen. Assume that cars are a normal good. Draw a diagram of the supply and demand curves for cars in China to explain what has happened in the Chinese car market.

Although he was a prolific artist, Pablo Picasso painted only 1,000 canvases during his "Blue Period." Picasso is now dead, and all of his Blue Period works are currently on display in museums and private galleries throughout Europe and the United States. a. Draw a supply curve for Picasso Blue Period works. Why is this supply curve different from ones you have seen? b. Given the supply curve from part a, the price of a Picasso Blue Period work will be entirely dependent on what factor(s)? Draw a diagram showing how the equilibrium price of such a work is determined. c. Suppose rich art collectors decide that it is essential to acquire Picasso Blue Period art for their collections. Show the impact of this on the market for these paintings.

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.

Use a diagram to illustrate how each of the following events affects the equilibrium price and quantity of pizza. a. The price of mozzarella cheese rises. b. The health hazards of hamburgers are widely publicized. c. The price of tomato sauce falls. d. The incomes of consumers rise and pizza is an inferior good. e. Consumers expect the price of pizza to fall next week.
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