Chapter 4 graph notes - In part(a demand for Caribbean...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
In part (a), demand for Caribbean cruises increases because of extensive advertising, and the demand curve shifts rightward from D 1 to D 2 . This shift in demand causes a temporary shortage of 8,000 cruises per year at the initial equilibrium of E 1 . This disequilibrium condition encourages firms in the cruise business to move upward along the supply curve to a new equilibrium at E 2 . Part (b) illustrates a decrease in the demand for gas-guzzling automobiles (SUVs) caused by a sharp rise in the price of gasoline (a complement). This leftward shift in demand from D 1 to D 2 results in a temporary surplus of 20,000 gas guzzlers per month at the initial equilibrium of E 1 . This disequilibrium condition forces sellers of these autos to move downward along the supply curve to a new equilibrium of E 2 . In part (a), begin at equilibrium E 1 in the market for babysitters and assume an increase in the number of babysitters shifts the supply curve rightward from S 1 to S 2 . This shift in supply causes a temporary surplus of 4,000 unemployed babysitters per month. This disequilibrium condition causes a movement downward along the demand curve to a new equilibrium at E 2 . At E 2 , the equilibrium price declines, and the equilibrium quantity rises.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern