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BU204_10 _Finley_Joey_ Unit 3

# BU204_10 _Finley_Joey_ Unit 3 - Running head BABYSITTING...

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Running head: BABYSITTING AND BIRTHRATE 1 Babysitting and Birthrate Joey D. Finley Kaplan University Macroeconomics BU204-10 Fazlul Miah March 22, 2011

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Babysitting and birthrate Question: The small town of Middling experiences a sudden doubling of the birth rate. After three years, the birth rate returns to normal. Use the graphs for each question, adding any arrows or other indicators that you feel are necessary, to illustrate the effect of these events on the following. 1. What is the effect on the market for an hour of babysitting services in Middling today, during this increased birthrate? Explain the change, if any in the price of babysitting, and in both the amount of babysitting demanded and supplied, giving your reasons for these changes. (10 points) \$ 0 Low Price High Price Very Few Many Many Q Problem 1, Babysitting DURING high birthrate S1 S1 D1 D1 D2 D2 Having a doubling of birth rate or an increase in birthrate directly demands for more babysitting to be done. A shift to the right in the demand curve will cause an increase in demand at every price. This will cause an increase in the price of babysitting because of the higher needed or demand of babysitting. The new equilibrium price will be higher than the original. The supply of babysitters will increase to make up for the increased demand, and there will be good money to be made during this time for babysitters.
2. What is the effect on the market for an hour of babysitting services 14 years into the future, after the birth rate has returned to normal, by which time children born today, during this increased birthrate, will be old enough to work as babysitters? Explain the change, if any in the price of babysitting, and in both the amount of babysitting demanded and supplied, giving your reasons for these changes. (10 points)

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BU204_10 _Finley_Joey_ Unit 3 - Running head BABYSITTING...

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