Hill Method Problems Analyze using the Hill method the following questions (Ther
ID: 1146750 • Letter: H
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Hill Method Problems Analyze using the Hill method the following questions (There is at least one question that changes each and evey supply and demand determinant) The Department of Agriculture holds the price of corn above equilibrium (ie. establishes a price floor). What happens to the price and quantity of corn? Through rent control legislation, the government holds the price of rental housing below equilibrium (i.e. establishes a price ceiling) What happens to quantity of rental units? People start preferring Coke to Pepsi. What happens to the price and quantity of Coke? 1· 2· 3. 4. In April 80% of the American population gets an income tax rebate. What happens to the 5. In April,80% of the American population gets an income tax rebate, what happens to the 6. The government bans the sale of cigarettes to children and enforces it. What happens to 7. The price of gold increases. What happens to the price and quantity of silver? Assume gold price and quantity of all normal goods? price and quantity of all inferior goods? the price and quantity of cigarettes? and silver are substitute materials The price of shoes increases. What happens to the price and quantity of shoe strings? People expect the price of gasoline to increase. What happens to the price and quantity of 8. 9. gasoline? 10. A new machine is invented to make cars more fuel efficient. What happens to the price and quantity of gasoline? 11. The cost of labor increases. What happens to the price and quantity of cars? 12. Renegotiation of the NAFTA trade agreement results in the restriction of the amount of Canadian made cars allowed in the United States. of Canadian Made Cars? What happens to the price and quantity 13. A vast oil reserve is discovered under Lake Michigan. What happens to the price and quantity of gasoline?Explanation / Answer
1) Such a floor above equilibrium it leads to excess supply , because producers supply more compared to the demand causing demand supply gap.
2) price ceiling below market equilibrium it caused excess demand , suppliers wont like to produce at such a low prices but demand is high because goods are comparatively cheaper.
3)change in demand shift price and output in same direction ,increase in preference for coke will incre equilibrium price and quantity for coke
4) income tax rebate leads to fall in price and rise quantity demanded for normal good
5)Inferior good work exactly opposite to the normal good the demand and prices both fall because consumers prefer normal good
6) ban on cigarattes affect supply , fall in supply will increase prices and decrease quantity of good
7)increase in price of gold will raise demand for silver , howver the price will rise eventually due to increase of shift towards silver
8) if they are complements price increase in one reduces quantity demanded for another , less of each good is demanded
9) due to expectation demand increase in so does the price , so people buy mroe in current period to save from future rate but end with high price.
10) fall in demand and price of gasoline , shifts leftwards
12) again supply effect , rise in price and fall in quantity of cars imported into states
13) vast oil reserves will increase supply of oil causing fall in equilibrium price and increase in quantity , fall in prices also cause rise in demand so over all quantity increases.
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