Has changed this is not a case of a movement along a

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Essentials of Economics
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Chapter 10 / Exercise 2
Essentials of Economics
Mankiw
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has changed, this is not a case of a movement along a supply curve (and thus does not violate the law of supply). POINTS: 1 DIFFICULTY : Challenging NATIONAL S TANDARDS: United States - BUSPROG: Analytic
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Essentials of Economics
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Chapter 10 / Exercise 2
Essentials of Economics
Mankiw
Expert Verified
LOCAL STAN DARDS: United States - OH - Default City - DISC: Supply and Demand KEYWORDS: Bloom's: Analysis 222. When Hurricane Katrina hit the Gulf Coast of the United States in 2005 it destroyed 5,000,000 acres of timber. Given that lumber is timber that has been sawed or split into planks and boards, explain in terms of supply and/or demand how the hurricane impacted each of the following markets (be sure to note the expected resulting impact on equilibrium price and quantity): a. Domestic lumber b. Imported lumber c. New home construction ANSWER: a. The severe weather would be expected to shift the supply curve for domestic lumber to the left, but would not automatically shift the demand curve. This would result in a higher equilibrium price and a lower equilibrium quantity for domestic lumber. b. Imported lumber is a substitute for US-grown lumber, therefore the demand curve for imported lumber would be expected to shift to the right. The supply curve for imported lumber would not automatically shift. This would result in a higher equilibrium price and a higher equilibrium quantity for imported lumber. c. An increase in the price of timber would represent an increase in a resource cost for those who are building new homes. Higher resource costs shift the supply curve for new home construction to the left, but the demand curve would not automatically shift. This would result in a higher equilibrium price and a lower equilibrium quantity for new homes. POINTS: 1 DIFFICULTY: Challenging NATIONAL STAND ARDS: United States - BUSPROG: Analytic LOCAL STANDARD S: United States - OH - Default City - DISC: Supply and Demand KEYWORDS: Bloom's: Synthesis 223. Explain the difference between a change in demand and a change in quantity demanded. Be sure to specify what causes each to change and how they differ when graphed. ANSWER: A change in demand results from a change in one or more of the determinants of demand: prices of related goods (substitutes and complements), income of buyers, number of buyers, expectations of future price, and preferences of buyers. When demand changes the entire demand curve shifts to the right (an increase in demand) or to the left (a decrease in demand). A change in quantity demanded results from a change in a good's own price and is shown on a graph by a movement along a given demand curve. POINTS: 1 DIFFICULTY : Moderate NATIONAL S TANDARDS: United States - BUSPROG: Analytic LOCAL STAN DARDS: United States - OH - Default City - DISC: Supply and Demand
KEYWORDS: Bloom's: Analysis 224. Describe one of the two reasons given in the textbook to help explain why price and quantity demanded are inversely related.

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