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Question

Explanation and Analysis<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Identify changes in market conditions and their effect on equilibrium price and quantity for the following events:

Event 1: The wages for all dental assistants increase, increasing the costs of inputs.

Event 2: The government provides national dental insurance benefits for all U.S. citizens that cover 100% of the cost of all dental services. There are two effects of this policy. First, there will be an increase in the number of consumers of dental services. Second, there will be fewer dentists willing to provide dental services, resulting in some dentists removing themselves from the market entirely.

Explanation / Answer

event 1

as the cost of imputs increases their demand decreases and it results in inflation and leads to unemploymental problems

event 2

as it provides 100% free of cost so it creates unemployment as many dentisits wont be able to accept the policy hence it would result in decrease in the dental assiatants wages and hence price decreases

event 1 and 2 follow inverse relation as one increases other decreases

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