Chapter 3: Q.14 (page 78)
Will demand curves have the same exact shape in
all markets? If not, how will they differ?
Demand curves have different shapes depending upon the type of market.
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Use the four-step process to analyze the impact
of a reduction in tariffs on imports of iPods on the
equilibrium price and quantity of Sony Walkman-type products.
Table 3.8 shows the information on the demand and supply for bicycles, where the quantities of bicycles are measured in thousands.
| Price | Qd | Qs |
|---|---|---|
| \(120 | 50 | 36 |
| \)150 | 40 | 40 |
| \(180 | 32 | 48 |
| \)210 | 28 | 56 |
| \(240 | 24 | 70 |
(a) What is the quantity demanded and quantity supplied at a price of ?
(b) At what price is the quantity supplied equal to ?
(c) Graph the demand and supply curves for bicycles. How can you determine the equilibrium price and quantity from the graph? How can you determine the equilibrium price and quantity from the table? What are the equilibrium price and the equilibrium quantity?
(d) If the price was , what would the quantities demanded and supplied be? Would a shortage or surplus exist? If so, how large would the shortage or surplus be?
What is producer surplus? How is it illustrated on
a demand and supply diagram?
What causes a movement along the demand curve?
What causes a movement along the supply curve?
We know that a change in the price of a product
causes a movement along the demand curve. Suppose consumers believe that prices will be rising in the future. How will that affect demand for the product in the present? Can you show this graphically?
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