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Chapter 3: Q. 8 (page 78)
Does a price ceiling change the equilibrium price?
No.
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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 pounds at every price.
(b) A new study says that eating cheese is good for your health, so that demand increases by 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 |
Review Figure 3.4. Suppose the government
decided that, since gasoline is a necessity, its price
should be legally capped at $1.30 per gallon. What do you anticipate would be the outcome in the gasoline market?
Suppose there is a soda tax to curb obesity. What
should a reduction in the soda tax do to the supply of sodas and to the equilibrium price and quantity? Can you show this graphically? Hint: Assume that the soda tax is collected from the sellers.
The computer market in recent years has seen many more computers sell at much lower prices. What shift in demand or supply is most likely to explain this outcome? Sketch a demand and supply diagram and explain your reasoning for each.
(a) A rise in demand
(b) A fall in demand
(c) A rise in supply
(d) A fall in supply
How can you locate the equilibrium point on a
demand and supply graph?
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