PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 3, Problem 2RQ
To determine
Cost producing good and its market price.
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Between 1950 and 2020, the price of wheat fell dramatically from $20.23 per bushel to $4.85 per bushel.
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An economist estimates that a market has a demand curve of the form P = 26 - (0.867) Q and a supply curve of the form P = 0.5 + (1.21) Q. (See the curves graphed in the figure below.) Accordingly, she estimates that the equilibrium price ( P e) in the market will be $15.36 (or $15.355561). This means that the amount of the product bought and sold in the market must be ____.
Suppose demand and supply are given by: (LO3, LO4)Qx d = 14 − 1/2Px and Qx s = 1/4Px − 1a. Determine the equilibrium price and quantity.
Chapter 3 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- An economist estimates that a market has a demand curve of the form P = 37- (1.23) Q and a supply curve of the form P = 1 + (0.984) Q. (See the curves graphed in the figure below.) Accordingly, she estimates that the quantity equilibrium (Qe) in this market will be 16.26 (or 16.260163) and that the equilibrium price (Pe) in the market will be. (Answer may be rounded to nearest hundredth.) Supply X Demand Q OA. $20.84 O B. $12.20 O C. $23.00 O D. $17arrow_forwardRecently, the spot market price of U.S. hot rolled steel plummeted to $400 per ton. Just one year ago, this same ton of steel cost $700. According to Metals Monitor, the drop in price was due to falling oil prices, along with a rise in cheap imports and excess capacity. These dramatic market changes have greatly impacted the supply of raw steel. Suppose that last year the supply for raw steel was QS, raw = 600 +4P, but this year it has shifted to QS raw- = 4,200 +4P. Assuming the market for raw steel is competitive and that the current worldwide demand for steel is Qara raw 9,000 -8P, compute the equilibrium price and quantity for the steel market one year ago, and the equilibrium price-quantity combination for the current steel market. Instructions: Enter your responses as whole numbers. Price one year ago: $ Quantity one year ago: Price for current market: $ Quantity for current market: Suppose the cost function of a representative steel producer is C(Q) = 1,200 + -15Q². How much raw…arrow_forwardEarlier this year, 2021, the price of chicken meat rose unexpectedly reached to 250/ kilo at peak from the previous price of 170/ kilo. This 68% increase of price per kilo was primarily caused by excess demand for chicken meat. This is the result of the decrease in consumption for pork meat due to the threat of African Swine Flu (ASF). However, even though consumer shifted preferences, the increase in the price of chicken was perceived to be too high for the budget of consumers. Therefore, sellers realized decrease in their daily aggregate sales from 1,000 kilos to 700 kilos. Illustrate the change in the market equilibrium through a graph. What presumably happened to the total revenues of the sellers during the = price hike period? Compute the price elasticity of demand. Derive the total revenue before the hike (TR1), and after the hike (TR2).arrow_forward
- Earlier this year, 2021, the price of chicken meat rose unexpectedly reached to 250/ kilo at peak from the previous price of 170/ kilo. This 68% increase of price per kilo was primarily caused by excess demand for chicken meat. This is the result of the decrease in consumption for pork meat due to the threat of African Swine Flu (ASF). However, even though consumer shifted preferences, the increase in the price of chicken was perceived to be too high for the budget of consumers. Therefore, sellers realized decrease in their daily aggregate sales from 1,000 kilos to 700 kilos. 1. Illustrate the change in the market equilibrium through a graph. 2. What presumably happened to the total revenues of the sellers during the price hike period? a.) Compute the price elasticity of demand b.) Derive the total revenue before the hike (TR1), and after the hike (TR2).arrow_forwardRecently, the spot market price of U.S. hot rolled steel plummeted to $400 per ton. Just one year ago, this same ton of steel cost $700. According to Metals Monitor, the drop in price was due to falling oil prices, along with a rise in cheap imports and excess capacity. These dramatic market changes have greatly impacted the supply of raw steel. Suppose that last year the supply for raw steel was QSraw = 600 + 4P, but this year it has shifted to QSraw= 4,200 + 4P. Assuming the market for raw steel is competitive and that the current worldwide demand for steel isQdraw = 9,000 – 8P, compute the equilibrium price and quantity for the steel market one year ago, and the equilibrium price–quantity combination for the current steel mar ket. Suppose the cost function of a representative steel producer is C(Q) = 1,200 + 15Q2. Compare the change in the quantity of raw steel exchanged at the market level with the change in raw steel produced by a representative firm. How do you explain this…arrow_forwardd. In general, what happens to the level of consumer sur 6. Suppose demand and supply are given by Qd = 60 - P and Qs =P - 20. (LO3, L04) a. What are the equilibrium quantity and price in this market? b. Determine the quantity demanded, the quantity supplied, and the magnitude of the surplus if a price floor of $50 is imposed in this market. c. Determine the quantity demanded, the quantity supplied, and the magnitude of the shortage if a price ceiling of $32 is imposed in this market. Also, determine the full economic price paid by consumers. 102 101arrow_forward
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- Consider the market for rubber. suppose a massive forest fire causes 50% of the world’s supply of rubber to be destroyed. First, depict what happens in the market for rubber. Then, depict what happens in the market for tires (where rubber is an input). Last, depict what happens in the market for cars, where tires are an input. What happened to the price of cars? Now, suppose that in order combat this event, the government announces that starting in three months (i.e. in the future), the government will give a $1000 rebate on purchases of new cars (i.e. the price of cars will decrease in the future). What happens in the market for new cars today? What happens in the market for used cars today? Finally, what is the net effect of everything that occurred on new/used cars equilibrium price and quantity (Hint: for one of these market’s variables, the net effect will be ambiguous)?arrow_forwardBoth the supply and the demand for crude oil seem to be price inelastic. It implies that changes in the price of crude oil have a relatively small effect on the quantity demanded or supplied. On the demand side, people as well as businesses tend to continue using oil products even after its price increases, as there are often few substitutes in the short run. That is why there is still growing demand for crude oil. On the supply side, it is difficult as well as expensive for the producers to quickly increase or stop oil production as a response to price changes. Therefore, even after a price rise, the supply is not enough to meet demand. It implies that any given change in supply or demand is likely to have a comparatively large effect on the equilibrium price than on the quantity of crude oil (the percentage change in the price will be higher than the percentage change in quantity). Draw a graph to show the information abovearrow_forwardAssume that demand and supply for a product over a period of time, respectively, are: Qdx = 15 - 0.5Px and Qsx = 0.25Px - 3. (a) Calculate the equilibrium price and quantity. Clearly show your steps and manual calculations. (b) Quantify and discuss the impact of imposing a price of $20 per unit on the market, including the full economic price paid by consumers. Clearly show your steps and manual calculations. (c) If government should impose a $8 excise tax on the product, determine the new equilibrium price and quantity. Clearly show your steps and manual calculations. Graphically illustrate your answer. (d) Calculate the amount of tax revenue that government would earn with $8 excise tax. Clearly show your steps and manual calculations. Graphically illustrate and carefully discuss the impact of substantial inflationary expectations on the market equilibrium conditions (equilibrium quantity and price) of automobiles in the United States. Consider the situation presented in Question…arrow_forward
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