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Parkin Microeconomics

In: Business and Management

Submitted By dlarocca86
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Problem 7 (page 80)

Price Quantity Quantity demanded supplied
20 180 60
30 160 80
40 140 100
60 100 140
70 80 160
80 60 180
100 20 220

a. Suppose that the price of gum is 70¢ a pack.
Describe the situation in the gum market and explain how the price adjusts.
At p=70, there is a surplus (excess supply), and we should expect the price to go down.

b. Suppose that the price of gum is 30¢ a pack. Describe the situation in the gum market and explain how the price adjusts.
At p= 30 there is a shortage (excess demand) and hence we should expect the price to go up.

Problem 8 (page 80)
The following events occur one at a time:

(i) The price of crude oil rises.
(ii) The price of a car rises.
(iii) All speed limits on highways are abolished.
(iv) Robots cut car production costs.

(i) The increase in the price of crude oil (a factor in the production of gas) will shift the supply curve for gas inward. Hence, the equilibrium price of gas will go up, and the equilibrium quantities demanded and supplied of gas will go down.

(ii) If the price of a car rises, then the demand of gas will shift inwards. Hence, the equilibrium price of gas will go down, and the equilibrium quantities demanded and supplied of gas will also go down.
(iii) If all speed limits are abolished, then the demand of gas will shift outwards. Hence, the equilibrium price of gas will go up, and the equilibrium quantities demanded and supplied of gas will also go up.

(iv) If robots can cut down production costs, then we may assume that the price of a car goes down. If the price of a car goes down, then the demand of gas will shift outwards. Hence, the equilibrium price of gas will go up, and the equilibrium quantities demanded and supplied of gas will also go up.

Problem 9 (page 80)

In Problem 7, a fire destroys some...

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