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Market Equilibrium Analysis

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Market Equilibrium Analysis
Question 1:
Auto sales data show that as the price of gasoline increased significantly recently, fewer people bought SUVs. Based on this economic fact, please address the following questions:
a. Determine the market in question (i.e., which market is of our interest for this homework);
b. Explain whether a shift in demand or supply occurred in the market in question;
c. Explain the reason and the direction of the shift;
d. Determine the effect of the shift on the equilibrium price and the equilibrium quantity;
e. Draw an equilibrium diagram to show the effect in question d. (refer to the text (pp.64-67) or instructor's lecture notes for examples of an equilibrium/shift)
Question 2:
Using the following fictitious demand and supply equations for housing in Minot: (you can assume these are demand and supply for two-bedroom apartments in the area if that will help your understanding. Question 8 in the book should also give some hints to solving this problem)
Demand: Q = 10800 - 12P
Supply: Q = -200 + 8P
Please address the following questions:
a. Graph the demand and supply curves in a single diagram to determine the equilibrium price and quantity.
b. Suppose the Minot City Council deemed that the price of housing is too high and institute a price ceiling (rental control) of $450. Discuss the market consequence of the price ceiling: is there a shortage or surplus in the market? How big is it? Please indicate it both graphically and numerically.

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Solution Summary

Market Equilibrium Analysis is achieved.

See Also This Related BrainMass Solution

Apply demand, supply and competitive equilibrium analysis

1. "If price rises then demand decreases. But if demand decreases, then equilibrium price will fall. Therefore, one cannot say with certainty what the net effect of an intitial decrease in price will be."
Is this statement correct? Are all the terms used correctly in this statement? Let me know your thoughts. How would you describe the impact of the minimum wage on unemployment using demand, supply and competitive equilibium analysis? What do you think?

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