Chapter 4: Q. 4.17 (page 94)
Consider Figure 4-3.Suppose that the government
reduces the ceiling price to\(500 per unit.Would
the shortage at the\)500-per-unit ceiling price be
greater than at the$600-per-unit price ceiling?
Yes.
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There are simultaneous changes in the demand for and supply of global-positioning system (GPS) devices, with the consequences being an unambiguous increase in the market clearing price of these devices but no change in the equilibrium quantity. What changes in the demand for and supply of GPS devices could have generated these outcomes? Explain.
Consider Figure 4-1.The current demand and
supply curves areD,and S₁,at which the equilib
rium price and quantity are P₁ and Q₁.If there isa
decrease in the price of an item that consumers
regard asasubstitute for this good,which curve
shifts,and in which direction does it shift?What
happens to the market clearing price and to the
equilibrium quantity?
The consequences of decriminalizing illegal drugs
have long been debated.Some claim that legal
ization will lower the price of these drugs and
reduce related crime and that more people will
use these drugs.Suppose some of these drugs are
legalized so that anyone may sell them and use
them.Now consider the two claims-that price
will fall and quantity demanded will increase.
Based on positive economic analysis,are these
claims sound?
Explain the effects of price floors and government-imposed quantity restrictions
Suppose that in Figure 4-4, the government raises
the floor price of milk above the displayed
Will the excess quantity of milk supplied increase
or decrease as a consequence?
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