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Chapter 4: Q. 2 (page 103)
In the labor market, what causes a movement along the supply curve? What causes a shift in the supply curve?
Changes in the wage rate causes a movement along the supply curve.
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Whether the product market or the labor market, what happens to the equilibrium price and quantity for each of the four possibilities: increase in demand, decrease in demand, increase in supply, and decrease in supply.
Imagine that to preserve the traditional way of life in small fishing villages, a government decides to impose a price floor that will guarantee all fishermen a certain price for their catch.
a. Using the demand and supply framework, predict the effects on the price, quantity demanded, and quantity supplied.
b. With the enactment of this price floor for fish, what are some of the likely unintended consequences in the market?
c. Suggest some policies other than the price floor to make it possible for small fishing villages to continue.
Would usury laws help or hinder resolution of a shortage in financial markets?
Identify the most accurate statement.
A price floor will have the largest effect if it is set:
a. substantially above the equilibrium price. b. slightly above the equilibrium price.
c. slightly below the equilibrium price.
d. substantially below the equilibrium price.
Sketch all four of these possibilities on a demand and supply diagram to illustrate your answer
Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers.
a. The number of people at the most common ages for home-buying increases.
b. People gain confidence that the economy is growing and that their jobs are secure.
c. Banks that have made home loans find that a larger number of people than they expected are not repaying those loans. d. Because of a threat of a war, people become uncertain about their economic future.
e. The overall level of saving in the economy diminishes.
f. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.
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