Economics problems

Read Summary
Summary

The first step is to identify the effects of the two changes on the market for greeting cards. The increase in popularity of audio messages shifts the demand curve for greeting cards leftward. The decrease in production costs shifts the supply curve for greeting cards rightward. The second step is to determine the new equilibrium point after the shifts in the demand and supply curves. The equilibrium price decreases and the equilibrium quantity increases. The third step is to show the adjustment process on a graph. The initial equilibrium point is at $5.00 and 140 cards a week. After the shifts in the demand and supply curves, the new equilibrium point is at $4.00 and 160 cards a week. The adjustment process involves a decrease in price and an increase in quantity until the new equilibrium point is reached.

Table of Content

What is the effect on the equilibrium price and equilibrium quantity of orange juice if the price of apple juice decreases and the wage rate paid to orange grove workers increases? Apple juice and orange juice are substitutes for consumers, so the fall in the price of apple juice decreases the demand for orange juice. The demand curie for orange juice shifts leftward. The increase in the wage rate paid to orange grove workers raises the cost of producing orange juice. The supply of orange juice decreases and the supply curve of orange juice shifts leftward.

The net effect of these events decreases the equilibrium quantity but has an undetermined effect on equilibrium price. If supply decreases by more than the demand, the shift in the supply curve is greater than the shift in the demand curve and the equilibrium price rises. If demand decreases more than the supply, the shift in the demand curve is greater than the shift in the supply curve and the equilibrium price falls. 3. What is the effect on the equilibrium in the orange juice market if orange juice becomes more popular and a cheaper robot is used to pick oranges?

This essay could be plagiarized. Get your custom essay
“Dirty Pretty Things” Acts of Desperation: The State of Being Desperate
128 writers

ready to help you now

Get original paper

Without paying upfront

Because orange juice becomes more popular, demand increases and the demand curve for orange juice shifts rightward. The cheaper picking robot lowers the production costs of orange juice, so the supply of orange juice increases and the supply curve of orange juice shifts rightward. The equilibrium quantity increases. But the effect on the equilibrium price is ambiguous. If the change in supply is greater than the change in demand, the shift in the supply curve is greater than the shift in the demand curve and the equilibrium price falls.

Fifth change in demand is greater than the change in apply, the shift in the demand curve is greater than the shift in the supply curve and the equilibrium price rises. The table shows the demand and supply schedules for greeting cards. Use the table to answer exercises 4 and 5. 4. Fifth price of a greeting card is $7. 00, describe the situation in the market. Explain how market equilibrium is restored. At the price of $5. 00, the quantity supplied equals the quantity demanded. At a price of $7. 00, the quantity demanded is 120 greeting cards and the quantity supplied is 160 greeting cards.

There is a surplus of 40 greeting cards a week and the price falls. As the falls, the quantity demanded increases, the quantity supplied decreases, and the surplus decreases. The price falls until the surplus disappears. The market equilibrium occurs at a price of $5. 00 and 140 cards a week so the price falls to $5. 00 a greeting card. 5. If new audio greeting message (sent via cell phone) becomes popular and at the same time the cost of producing greeting cards falls, set out the three-step process of analysis and show on a graph the adjustment process.

Cite this page

Economics problems. (2018, Feb 06). Retrieved from

https://graduateway.com/economics-problems/

Remember! This essay was written by a student

You can get a custom paper by one of our expert writers

Order custom paper Without paying upfront