Explore BrainMass
Share

Demand, Supply and Market Equilibrium

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

1. Using the demand curve shifters (PYNTE), explain whether each of the following will increase or decrease demand for cell phones. Tell whether the demand curve shifts to the right or to the left.

a. A decrease in the incomes of consumers of cell phones.
b. An increase in the price of apps for cell phones.
c. An increase in the number of consumers in the market for cell phones.

2. Using the supply curve shifters (SPEND) explain whether each of the following will increase or decrease the supply of cell phones. Tell whether the supply curve shifts to the right or to the left.

a. The market price of the glass used in cell phone screens increases.
b. The number of firm that make cell phones increases.
c. Cell phone manufacturers expect the market price of cell phones to increase next month.

3. Read the following article regarding Cap and Trade policies.

http://online.wsj.com/article/SB10001424052702304620304575165843688369042.html?mod=WSJ_hpp_sections_news

a. What is a good or service market that might be affected limiting pollution via the cap and trade policy as described in the article? Explain.

[For simplicity, do not choose "jobs" or employment. Choose a good or service that would have its supply or demand affected by the cap and trade policy.]

b. Which of the shifters that shift either supply or demand (SPEND or PYNTE) does a Cap and Trade policy affect in the market you chose in Part (a)? Which curve (supply or demand) would shift in response to the policy? Will it increase or decrease?

c. Draw a supply and demand graph. Start with an initial equilibrium like you see on Slide #25 in the Attend section. Shift the curve in the direction that you chose in the previous section. Find the new equilibrium. (You do not need to turn in your graph. It is for your own use.)

Did equilibrium price increase or decrease? Did equilibrium quantity increase or decrease?

© BrainMass Inc. brainmass.com October 25, 2018, 10:13 am ad1c9bdddf
https://brainmass.com/economics/supply-and-demand/demand-supply-and-market-equilibrium-602527

Solution Preview

In compliance with BrainMass rules this is not a hand in ready assignment but only guidance.

1. A) a decrease in the income of cell phone users decreases the demand for cell phones. At the same price, fewer cell phones will be sold because the income has gone down. The demand curve will shift to the left.
b), an increase in the prices of apps for cell phones will decrease the demand for cell phones. Apps are complementary products. Users of cell phones require apps. The decrease in demand means the demand curve will shift to the left.
c), an increase in the number of consumers in the market for cell phones increases the demand for cell phones. As there are more customers for cell phones, at the same prices more cell phones are ...

Solution Summary

This solution explains issues related to demand, supply and market equilibrium. The sources used are also included.

$2.19
See Also This Related BrainMass Solution

Economics: Demand & Supply, Market, and Equilibrium

Multiple Choice:

P(1)

1. Which of the following will cause a movement along the demand curve for good A?
a. a change in the price for a close substitute
b. a change in the price of good A
c. a change in consumer tastes for good A
d. a change in consumer income.

2. On a Cartesian graph of a product market, equilibrium at point labeled E1 is defined as occurring
when:
a. government has balanced out the forces of demand and supply
b. price is such that the quantity demanded exactly equals the quantity supplied
c. price maximizes the difference between demand and supply
d. prices are rising.

3. Assuming a market originally in equilibrium, an increase in demand would lead to:
a. equilibrium price increase, equilibrium quantity increase
b. equilibrium price increase, equilibrium quantity decrease
c. equilibrium price decrease, equilibrium quantity decrease
d. equilibrium price decrease, equilibrium quantity increase.

4. If an increase in the price of paper increases the cost of producing economics textbooks, what will
happen in the market for economics textbooks?
a. equilibrium price increase, equilibrium quantity increase
b. equilibrium price increase, equilibrium quantity decrease
c. equilibrium price decrease, equilibrium quantity decrease
d. equilibrium price decrease, equilibrium quantity increase.

5. If demand increases and supply increases, what will happen to equilibrium price?
a. increases
b. decreases
c. stays the same
d. all of the above are possible.

6. A single production isoquant for a multiple input firm
a. relates output to the amount of labor used keeping all other inputs constant.
b. relates total output to all inputs used.
c. represents the costs of the input factors.
d. illustrates all the combinations of capital and labor that will produce a constant level
of output.

7. If the marginal product of labor is 15 and marginal product of capital is 45, wages are $5
and cost of capital is $15, cost minimization requires:
a. more labor relative to capital.
b. more capital relative to labor.
c. that the firm shut down.
d. input usage is about right.

P (2). A consultant for X Corp. provided the firm's marketing manager with this estimate of the
demand function for the firm's product:

Qd = 12,000 - 3(Px) + 4 (Py) - 1(M) + 2(A).

Where Px is the price of good x, Py is the price of good Y, M is income, and Ax represents the amount of advertising spent on good x. Suppose good x sells for $200 per unit, good Y sells for $15 per unit, the company uses 2,000 units of ads, and consumer income is $10,000.
a. Are goods X and Y substitutes or complements?
b. Is good X a normal or an inferior good?
c. How much of good X do consumers purchase?
d. Simplify the equation to two variables Qd and Px, so the Demand curve can be
shown on a graph.

P3 - SEE ATTACHED

P (4). Draw a Marshallian short run production function of the form Q = f (Labor)
with capital fixed. (5 points)

a. Beneath the Total Product Curve, draw the Average Product Curve indicating its
maximum point.
b. Draw the Marginal Product curve indicating its maximum point and where MP = 0.

View Full Posting Details