# Demand and supply Show in a diagram the effect on the...

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Chapter 2 / Exercise 36
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
Expert Verified
The Paul H. Nitze School of Advanced International Studies The Johns Hopkins University MICROECONOMICS Fallterm 2018 SOLUTION PROBLEM SET I 1. Demand and supply. Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price and quantity of each of the following pairs of events, occurring simultaneously. a. The market for school books at the beginning of September 2018. i. The price of paper goes down because of the adoption of a new and more efficient technological production process; ii. Due to a school reform students are required to buy a greater number of school books per year. b. The market for Italian peaches. i. Farmer salaries go up due to a new regulation on the labor market that reduces short-term contracts as a form of employment in the agricultural sector; ii. A rising sensitivity towards a balanced diet that includes fruit and vegetables. c. The market for pay-TV football events in Italy. i. The famous football player Cristiano Ronaldo joined Juventus club; ii. The introduction of a new digital platform called Dazn in August 2018, creating a new market for streaming services, that offers live and on-demand streaming of events. Solution
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Chapter 2 / Exercise 36
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
Expert Verified
2 b. The market for Italian peaches. i. Farmer salaries go up due to a new regulation on the labor market that reduces short-term contracts as a form of employment in the agricultural sector; ii. A rising sensitivity towards a balanced diet that includes fruit and vegetables. Event i causes a leftward shift of the supply curve, since the price of an input has increased. Event ii causes a rightward shift of the demand curve, due a change in consumers’ preferences. The two schedules therefore move in the opposite directions. Both events call for an increase in price, which is observed in equilibrium. The effect on quantity will depend on the relative magnitude of the shifts. If demand leads, quantity increases (see graph below). The market for books P books D 1 D 2 S 1 S 2 P 2 E 2 P 1 E 1 Q 1 Q 2 Q books The market for peaches P peaches D 1 D 2 S 2 P 2 E 2 S 1 P 1 E 1 Q 1 Q 2 Q peaches
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