Purchase Solution

Effect of market shocks on equilibrium price and quantity

Not what you're looking for?

Ask Custom Question

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?

Purchase this Solution
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.

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, ...

Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

View More Free Quizzes
Related BrainMass Solutions

  • How supply shocks affect supply and demand curves.

    3. describe the direction of the shift in the supply curve, demand curve, or both. Supply shocks generally have a twofold effect on the market.

  • Effects of Market Shocks on Price and Quantity

    This solution explains the effects on equilibrium price and quantity of six shocks to a given market.

  • Effect of 4 events on the French wine market

    436765 Predict the effects on price and quantity of the following shocks to the French wine market. What will be the effect of the following events on the market for French wine and the quantity consumed?

  • costs of price adjustment, called "menu costs,"

    · Price theory must also be amended in a way that integrates the possibility of non-clearing markets, the presence of quantity signals, and makes agents themselves responsible for price making · Equilibrium in the short run is achieved by quantity

  • Plots and multiple choice

    What will be the effect on the demand curve, and what will happen to market equilibrium price and quantity in the short run if the price of the product rises?

  • Beneficial and adverse supply shocks

    What is the resulting impact on potential GDP? Supply shock: A disruption of market equilibrium caused by a change in a supply determinant and a shift of the supply curve.

  • supply and demand curves

    Plot the supply and demand curves and indicate the equilibrium price and quantity. b. What effect would a decrease in the price of beef have on the equilibrium price and quantity of hamburgers, assuming all other things remained constant?

  • Effect on supply, equillibrium price & quantity in short-run

    193918 Effect on supply, equillibrium price & quantity in short-run For each of the following changes, show the effect on the supply curve, and state what will happen to market equilibrium price and quantity in the short run. a.

  • how changes in supply and demand affect equilibrium P and Q.

    The changes lead to a shift in supply and/or demand. I explain the results that these effects have on market equilibrium Price and Quantity.

View More Related Solutions