PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 3, Problem 1P
To determine
The impact on the supply curve in different situations.
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Between 1950 and 2020, the price of wheat fell dramatically from $20.23 per bushel to $4.85 per bushel.
Suppose between 1950 and 2020, the supply of wheat increased substantially due to increases in productivity, shifting the wheat supply curve to the right.
With this supply shift, the amount by which the price of wheat falls will be larger the more
the demand for wheat.
In addition, assume that between 1950 and 2020 the income of the average American increased substantially and that wheat is a normal good.
With this increase in income,
OA. the price of wheat will be unaffected.
OB. the amount by which the price of wheat rises will be smaller the higher the income elasticity of wheat.
C. the amount by which the price of wheat falls will be smaller the higher the income elasticity of wheat.
OD. the amount by which the price of wheat rises will be smaller the lower the income elasticity of wheat.
OE. the amount by which the price of wheat falls will be larger the higher the income…
Recently, the spot market price of U.S. hot rolled steel plummeted to $400 per ton. Just one year ago, this same ton of steel cost $700. According to Metals Monitor, the drop in price was due to falling oil prices, along with a rise in cheap imports and excess capacity. These dramatic market changes have greatly impacted the supply of raw steel. Suppose that last year the supply for raw steel was QSraw = 600 + 4P, but this year it has shifted to QSraw= 4,200 + 4P. Assuming the market for raw steel is competitive and that the current worldwide demand for steel isQdraw = 9,000 – 8P, compute the equilibrium price and quantity for the steel market one year ago, and the equilibrium price–quantity combination for the current steel mar ket. Suppose the cost function of a representative steel producer is C(Q) = 1,200 + 15Q2. Compare the change in the quantity of raw steel exchanged at the market level with the change in raw steel produced by a representative firm. How do you explain this…
Last year, 1000 gallons of almond milk (a non-dairy product) were sold at a price of $10. Yet, this year, a bad harvest in California has wiped out a
significant part of the almond harvest. At the same time, a larger number of people are looking to shift away from dairy products towards non-
dairy alternatives. Because of these two changes,
the equilibrium price will increase and change in the equilibrium quantity is unambiguous.
the equilibrium price will decrease but change in the equilibrium quantity is ambiguous.
the change in the equilibrium price is ambiguous, but the equilibrium quantity will increase.
O the equilibrium price will increase but change in the equilibrium quantity is ambiguous.
Chapter 3 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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