Explore BrainMass
Share

Explore BrainMass

    Effect of market shocks on equilibrium price and quantity

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    According to an article in the Wall street Journal, during 2006, the demand for full-size pickup trucks declined as a result of rising gas prices and a decline in housing construction (construction firms are an important part of the market for full-size pickup trucks). At the same time, Toyota began production of trucks at a new factory in Texas.

    Briefly discuss whether this problem provides enough information to determine whether the equilibrium price and quantity of trucks increased or decreased.

    If so, what would have happened to the equilibrium price and quantity of pick-up trucks?

    © BrainMass Inc. brainmass.com October 10, 2019, 5:54 am ad1c9bdddf
    https://brainmass.com/economics/demand-supply/effect-of-market-shocks-on-equilibrium-price-and-quantity-521204

    Solution Preview

    The problem only provides enough information to determine that the equilibrium price decreased. The equilibrium quantity could have increased, decreased, or stayed the same.

    The article says that the demand for trucks decreased. If supply remained constant, ...

    Solution Summary

    This solution shows how to determine if there is enough information to determine whether the equilibrium price and quantity of pickup trucks would increase or decrease in response to two market shocks: one affecting demand and the other affecting supply.

    $2.19