PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 3, Problem 9P
To determine
Impact of mad cow disease and new breed chicken on
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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…
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PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- You run a small business and would like to predict what will happen to the quantity demanded for your product if you raise your price. While you do not know the exact demand curve for your product, you do know that in the first year you charged $53 and sold 901 units and that in the second year you charged $42 and sold 1,186 units. If you plan to lower your price by 10 percent, what would be a reasonable estimate of what will happen to quantity demanded in percentage terms? Incorporate the point elasticity of demand using the initial price and quantity in your answer.arrow_forwardSales of bananas have dropped from 100,000 pounds to 75,000 pounds per day because a freeze resulted in a smaller supply. In the process, the average price of a pound of bananas has risen from $0.80 to $1.00. Which of the following is most likely true? The demand for bananas has increased because of the increase in price.The demand for ice cream (used in banana splits) is likely to decrease.The price of tapes will rise about 25 percent.The total revenue (P times Q) from sales has risen.The quantity demanded of ice cream will increase. Flag this Questionarrow_forwardChina’s Thirst for Gas Hurricanes in the Gulf of Mexico, deteriorating pipelines in Alaska, and conflict in Iraq can cause gasoline prices to rise by restricting supply. Often the events we see in the headlines affect the supply of oil available to consumers, but changes in the level of world demand for petroleum products also affects the price of oil. China’s Growing Demand U.S. demand for petroleum products has been high for decades. The United States is the largest consumer of oil, using about a quarter of the world’s petroleum. This is quickly changing. Emerging nations are becoming thirsty for oil, and China is at the top of that list. How did such a rapid change happen? In the past, China has not needed much petroleum. As the country is industrializing, however, it needs more and more fuel to satisfy its growing energy needs. In fact, as the graph of oil consumption between 1995 and 2025 shows, China’s consumption is increasing much more rapidly than…arrow_forward
- Question Earlier this year, 2021, the price of chicken meat rose unexpectedly reached to 250/ kilo at peak from the previous price of 170/ kilo. This 68% increase of price per kilo was primarily caused by excess demand for chicken meat. This is the result of the decrease in consumption for pork meat due to the threat of African Swine Flu (ASF). However, even though consumer shifted preferences, the increase in the price of chicken was perceived to be too high for the budget of consumers. Therefore, sellers realized decrease in their daily aggregate sales from 1,000 kilos to 700 kilos. 1. Illustrate the change in the market equilibrium through a graph. 2. What presumably happened to the total revenues of the sellers during the price hike period? a.) Compute the price elasticity of demand b.) Derive the total revenue before the hike (TR1), and after the hike (TR2).arrow_forwardYou are an analyst covering the oil and gas markets. You know from experience that natural gas and fuel oil are competing fuels; they are substitutes in certain production processes. A new technology has made it more cost-effective to extract natural gas from hard-to-reach geological formations. Using the supply and demand model, explain how this technological development will change (1) the market for natural gas and (2) the market for fuel oil.arrow_forwardPlease help with these economics questions. Thank you! Belikin beer has lost customers to Presidente because of its lower price. Before Presidente beer entered Belize’s market, Bowen and Bowen sold Belikin beer for $3.75 and the quantity supplied was fifty thousand (50,000) bottles of beer a month. One year after Presidente entered the market, the price fell to $3.25, and the quantity supplied fell to forty-five thousand (45,000) beer bottles. a. Calculate Price Elasticity of Supply. b. Is supply price elastic or inelastic? How do you know? c. Sketch the supply curve for Belikin beer. Briefly discuss its slope.arrow_forward
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