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PS#3

The document outlines a problem set focused on supply and demand concepts in economics, specifically related to minivans, computers, sweatshirts, pizza, and the relationship between bagels and cream cheese. It includes various scenarios that require analysis of how different factors affect market equilibrium and the determinants of demand and supply. The problems involve graphical representation and explanation of market changes based on specified events.

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a9989989920011018
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20 views2 pages

PS#3

The document outlines a problem set focused on supply and demand concepts in economics, specifically related to minivans, computers, sweatshirts, pizza, and the relationship between bagels and cream cheese. It includes various scenarios that require analysis of how different factors affect market equilibrium and the determinants of demand and supply. The problems involve graphical representation and explanation of market changes based on specified events.

Uploaded by

a9989989920011018
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Problem Set #3

chapter 4 (ps3: #3, 5, 6, 8, 10)


3) Consider the market for minivans. For each of the events listed here, identify which of the
determinants of demand or supply are affected. Also indicate whether demand or supply
increases or decreases. Then draw a diagram to show the effect on the price and quantity of
minivans.
a. People decide to have more children.
b. A strike by steelworkers raises steel prices.
c. Engineers develop new automated machinery for the production of minivans.
d. The price of sports utility vehicles rises.
e. A stock market crash lowers people’s wealth.

5) Over the past 40 years, technological advances have reduced the cost of computer chips. How
do you think this has affected the market for computers? For computer software? For
typewriters?

6) Using supply-and-demand diagrams, show the effects of the following events on the market
for sweatshirts.
a. A hurricane in South Carolina damages the cotton crop.
b. The price of leather jackets falls.
c. All colleges require morning exercise in appropriate attire.
d. New knitting machines are invented.
8) The market for pizza has the following demand and supply schedules:

a. Graph the demand and supply curves. What are the equilibrium price and quantity in this market?

b. If the actual price in this market were above the equilibrium price, what would drive the market
toward the equilibrium?

c. If the actual price in this market were below the equilibrium price, what would drive the market
toward the equilibrium?

10) Because bagels and cream cheese are often eaten together, they are complements.

a. We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels
have risen. What could be responsible for this pattern: a fall in the price of flour or a fall in the price of
milk? Illustrate and explain your answer.

b. Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of
bagels has fallen. What could be responsible for this pattern: a rise in the price of flour or a rise in the
price of milk? Illustrate and explain your answer.

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