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Demand and supply shifts

1) How will the following situations impact the helicopter tour business?

Using the Demand and Supply model anpredict what could happen to the demand/supply curves and to equilibrium price. Include the curves in your response.

a.The impact on the business in the event of real incomes decrease(ceteris paribus).
b.The impact on the business in the event of a decrease in fuel prices(ceteris paribus)
c.The impact on the business in the event of the adult population increase(ceteris paribus)

2) There, been a significant decrease in demand for a conventional line long distance calling service. Use a Demand/Supply model and the determinants of demand to provide answers:

a. What's the expected impact on the market equilibrium price for this product? Why?

b. Applying the demand determinants explain the causes of this shift.

3) What do you think be the predictable effect would be on the US medical drug market if the government imposed a price ceiling of $100 for a unit of a drug while the current market clearing price for this drug was $150?

Solution Preview

Using the Demand and Supply model and predict what could happen to the demand/supply curves and to equilibrium price. Include the curves in your response.

a.The impact on the business in the event of real incomes decrease (ceteris paribus).

Helicopter tours are a luxury item, and would be greatly affected by a decline in income. As income declines the demand curve would shift leftward, resulting in a lower quantity demanded and a lower market clearing price. See the attached file "a."

b.The impact on the business in the event of a decrease in fuel prices (ceteris paribus)

Lower fuel prices would allow the company to produce more tours at the same price. This shifts the supply curve ...

Solution Summary

Changes in demand and supply for drugs and helicopter rides.

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