This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: The price was set below equilibrium price => shortage resulted. (b) Two possible explanations: (i) Consumers are hoarding, so current demand increases and shortage increases. (ii) Suppliers pull soap off shelves to sell it in January. 7. Bush is wrong. Excess demand at p drove o price up. Rise in price induced greater quantity supplied and movement to new Equilibrium E . 1 8.(a) Supply is schedule “B”. Demand is schedule “A”. (b) See graph. (c) X = 8½p or p = 16  2X and D D X = ½p or p = 2X. S S set 162X* = 2X* and solve for X* Get X* = 4 which implies that p* = $8/unit (d) If eating chocolate reduces heart disease you’d expect an increase in demand ( 8 D) which would imply, eventually, an increase in both X* and p*. p X 16 8 D S p* = 8 X* 4 D new p* X* APS2 4...
View
Full Document
 Fall '06
 WISSINK
 Economics, Supply And Demand, current demand increases

Click to edit the document details