please do this problem thanks. Document1 -Word 10 Norme 1 No Spac. Heading 1 Hee
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please do this problem thanks.
Document1 -Word 10 Norme 1 No Spac. Heading 1 Heeding 2 Tide Parag ach For the study question below, you do not have to graph them only explain what happens to supply, equilibrium price and quantity given the following situations. Explain what happens to supply, price, and quantity when the following conditions occur a) A new technology is developed to pick peaches b) The government allows more furniture imports from China c) Interest rates are lowered to help spur the economy d) The cost of rubber which is used in the manufacturing of tires increases e) The government imposes a tax in imports of foreign carsExplanation / Answer
Ans. We assume that there is a situation of Equilibrium in the market ie Demand = Supply . We will see the impact of these points on Supply, Equilibrium Price and Quantity assuming that Demand remains constant.
a) If a new technology is developed to pick peaches , Supply of Peaches will increase ie Supply curve shifts rightwards. This will decrease the Equilibrium Price and Increase the Equilibrium Quantity.
b) If government allows more furniture imports from China , then Supply of Furniture in the Economy would increase , This will in turn decrease the Equilibrium Price and Increase in Equilibrium Quantity.
c) If interest rates are lowered in the economy , people would be taking more and more loans . Thus Supply of Money in the Market would Increase . This will inturn reduce the Equilibrium Price and Increase the Equilibrium Quantity.
d) If cost of rubber increases , it means that production cost of Tyres also increases. Thus producer would be willing to produce less. This will Decrease the Supply. This in turn will increase the Equilibrium Price and would reduce the Equilibrium Quantity.
e) If government imposes taxes on import of foreign cars , This would reduce the Supply of Foreign Cars in our country. Thus Supply curve would move leftwards. This will increase the Equilibrium Price and Decrease the Equilibrium Quantity.
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