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Chapter 3: Q. 50 (page 79)
Explain why voluntary transactions improve social
welfare.
Voluntary transactions improve the situation of both buyers and sellers.
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What is the difference between the demand and the quantity demanded of a product, say milk? Explain in words and show the difference on a graph with a demand curve for milk.
Suppose both of these events took place at the same time. Combine your analyses of the impacts of the iPod and the tariff reduction to determine the likely impact on the equilibrium price and quantity of Sony Walkman-type products. Show your answer graphically.
Table 3.9 illustrates the market's demand and supply for cheddar cheese. Graph the data and find the equilibrium. Next, create a table showing the change in quantity demanded or quantity supplied, and a graph of the new equilibrium, in each of the following situations:
(a) The price of milk, a key input for cheese production, rises, so that the supply decreases by 80 pounds at every price.
(b) A new study says that eating cheese is good for your health, so that demand increases by 20% at every price.
| Price per pound | Qd | Qs |
|---|---|---|
| \(3.00 | 750 | 540 |
| \)3.20 | 700 | 600 |
| \(3.40 | 650 | 650 |
| \)3.60 | 620 | 700 |
| \(3.80 | 600 | 720 |
| \)4.00 | 590 | 730 |
Will demand curves have the same exact shape in all markets? If not, how will they differ?
Name some factors that can cause a shift in the demand curve in markets for goods and services.
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