Chapter 4: Q. 4.19 (page 94)
Suppose that in Figure 4-4,the government
reduces the floor price of milk below the displayed
\(0.10-per-pound floor price,to\)0.08 per pound.
Will the excess quantity of milk supplied increase
or decrease asaconsequence?
Decrease.
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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?
How might California cities alternatively have developed a rationing-by-queues approach using the internet?
In recent years, technological improvements have greatly reduced the costs of producing basic cell phones, and a number of new firms have entered the cell phone industry. At the same time, prices of substitutes for cell phones, such as smartphones and some tablet devices, have declined considerably. Construct a supply and demand diagram of the market for cell phones. Illustrate the impacts of these developments, and evaluate the effects on the market price and equilibrium quantity.
Explain the effects of price ceilings
Discuss the essential features of the price system
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