Chapter 3: Q.48 (page 79)
Can you propose a policy that would induce the market to supply more rental housing units?
Reduced property taxes would make owning and renting out homes more affordable for landlords, leading to an increase in supply.
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Does a price ceiling change the equilibrium price?
In an analysis of the market for paint, an economist discovers the facts listed below. State whether each of these changes will affect supply or demand, and in what direction.
a. There have recently been some important cost-saving inventions in the technology for making paint.
b. Paint is lasting longer, so that property owners need not repaint as often.
c. Because of severe hailstorms, many people need to repaint now.
d. The hailstorms damaged several factories that make paint, forcing them to close down for several months.
Table 3.10 shows the supply and demand for movie tickets in a city. Graph demand and supply and identify the equilibrium. Then calculate in a table and graph the effect of the following two changes.
a. Three new nightclubs are open. They offer decent bands and have no cover charge, but make their money by selling food and drink. As a result, demand for movie tickets falls by six units at every price.
b. The city eliminates a tax that is placed on all local entertainment businesses. The result is that the quantity supplied of movies at any given price increases by 10%.
What is total surplus? How is it illustrated on a demand and supply diagram?
Let's think about the market for air travel. From August 2014 to January 2015, the price of jet fuel increased roughly 47%. Using the four-step analysis, how do you think this fuel price increase affected the equilibrium price and quantity of air travel?
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