Thank you! Ketchup is a complement (as well as a condiment) for hot dogs. If the

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Thank you!

Ketchup is a complement (as well as a condiment) for hot dogs. If the price of hot dogs rises, what happens in the market for ketchup? For tomatoes? For tomato juice? For orange juice? The market for pizza has the following demand and supply schedules 7. responsible for this pattern-a rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer. 11. Suppose that the price of basketball tickets at your 8. college is determined by market forces. Currently, the demand and supply schedules are as follows: Price Quantity Demanded Quantity Supplied Price Quantity Demanded Quantity Supplied 135 pizzas 26 pizzas 53 10,000 tickets 104 81 68 53 8 12 16 20 8,000 6,000 4,000 2,000 8,000 tickets 8,000 8,000 8,000 8,000 6 8 a. Draw the demand and supply curves. What is b. What are the equilibrium price and quantity of c. Your college plans to increase total enrollment a. Graph the demand and supply curves. What are unusual about this supply curve? Why might this the equilibrium price and quantity in this market? b. If the actual price in this market were above the be true? tickets? next year by 5,000 students. The additional stu- 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 dents will have the following demand schedule: toward the equilibrium? 9. Consider the following events: Scientists reveal that Price Quantity Demanded eating oranges decreases the risk of diabetes, and at the same time, farmers use a new fertilizer that makes orange trees produce more oranges. Illustrate and explain what effect these changes have on the equilibrium price and quantity of oranges. Because bagels and cream cheese are often eaten together, they are complements. a. We observe that both the equilibrium price of cream $4 8 12 16 20 4,000 tickets 3,000 2,000 1,000 10. 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 Now add the old demand schedule and the demand schedule for the new students to calculate the new demand schedule for the entire college. What will be the new equilibrium price and quantity? b. Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What could be To find additional study resources, visit cengagebrain.com, and search for "Mankiw."

Explanation / Answer

(7)

If price of hot dog rises, quantity demanded of hot dogs falls (following law of demand) and demand for ketchup (a complement) falls. Demand curve for ketchup shifts leftward, decreasing both price and quantity of ketchup.

Tomato being an input to ketchup, lower demand for ketchup will decrease the demand for tomato. Demand curve for tomato shifts leftward, decreasing both price and quantity of tomato.

Tomato being an input to tomato juice, a decrease in price of tomato will lower the cost of production of tomato juice, and tomato juice producers will increase production and output. Supply of tomato juice will rise, shifting its supply curve rightward, thus lowering price and increasing quantity of tomato juice.

Finally, orange juice being substitute of tomato juice, lower price of tomato juice will decrease in demand for orange juice. Demand curve for orange juice shifts leftward, decreasing both price and quantity of orange juice.

NOTE: As per Answering Policy, first question has been answered.

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