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Chapter 3: Q 22. (page 78)

When analyzing a market, how do economists deal with the problem that many factors that affect the market

are changing at the same time?

Short Answer

Expert verified

Economists prefer to consider one factor at a time and keep the other factors fixed.

Step by step solution

01

Step 1. Define market.

A market refers to a place for buyers and sellers to enable the exchange of products and services.

02

Step 2. How do economists dealwith the problem that many factors that affect the market are changing at the same time?

Economists prefer to consider one factor at a time and keep the other factors fixed in order to study the change in the factors impacting the market more easily. Although this method is difficult to implement in the actual world, it simplifies the understanding of an economic model.

For example, demand for ordinary items can rise as a consumer's income rises or as the price of these goods falls. Economists will strive to isolate both variables and consider only one factor at a time, keeping the other constant, in order to make their study easier.

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Most popular questions from this chapter

Table 3.10 shows the supply and demand for movie tickets in a city. Graph demand and supply and identify the equilibrium. Then calculate in a table and graph the effect of the following two changes.

a. Three new nightclubs are open. They offer decent bands and have no cover charge, but make their money by selling food and drink. As a result, demand for movie tickets falls by six units at every price.

b. The city eliminates a tax that is placed on all local entertainment businesses. The result is that the quantity supplied of movies at any given price increases by 10%.

Review Figure 3.4 again. Suppose the price of gasoline is \(1.00. Will the quantity demanded to be lower or higher than at the equilibrium price of \)1.40 per gallon? Will the quantity supplied be lower or higher? Is there a shortage or a surplus in the market? If so, of how much?

How do you suppose the demographics of an aging population of 鈥淏aby Boomers鈥� in the United States will affect the demand for milk? Justify your answer.

What is consumer surplus? How is it illustrated on a demand and supply diagram?

In an analysis of the market for paint, an economist discovers the facts listed below. State whether each of these changes will affect supply or demand, and in what direction.

a. There have recently been some important cost-saving inventions in the technology for making paint.

b. Paint is lasting longer, so that property owners need not repaint as often.

c. Because of severe hailstorms, many people need to repaint now.

d. The hailstorms damaged several factories that make paint, forcing them to close down for several months.
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