Assignment
Question 1
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.
Question 2
Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, state how the event will affect the supply and demand diagram, and justify your answer.
a) Cars are becoming more fuel efficient, and therefore get more miles to the gallon.
b) The winter is exceptionally cold.
c) A major discovery of new oil is made off the coast of Norway.
d) The economies of some major oil-using nations, like Japan, slow down.
e) A war in the Middle East disrupts oil-pumping schedules.
f) Landlords install additional insulation in buildings.
g) The price of solar energy falls dramatically.
h) Chemical companies invent a new, popular kind of plastic made from oil.
Question 3
Answer the following questions on price controls.
a) Does a price ceiling change the equilibrium price?
b) What would be the impact of imposing a price floor below the equilibrium price?
c) Does a price ceiling increase or decrease the number of transactions in a market? Why? What about a price floor?
d) Does a price ceiling attempt to make a price higher or lower?
e) How does a price ceiling set below the equilibrium level affect quantity demanded and quantity supplied?
f) Does a price floor attempt to make a price higher or lower?
Question 4
Complete the following. Note that several factors are listed in the book. For each factor, be sure to tell how it will shift the curve.
a) Name some factors that can cause a shift in the demand curve in markets for goods and services.
b) Name some factors that can cause a shift in the supply curve in markets for goods and services.
Question 5
Most government policy decisions have winners and losers. What are the effects of raising the minimum wage? It is more complex than simply producers lose and workers gain. Who are the winners and who are the losers, and what exactly do they win and lose? To what extent does the policy change achieve its goals?
Question 6
Explain why voluntary transactions improve socialwelfare. What happens if transactions are forced? Can consumers get more or less happiness (holding their income/wealth constant) if they are forced into transactions they don't want versus being able to choose what transactions they participate in?
Question 7
Classify the following goods as normal or inferior and provide a justification. (It might be easiest to create a table in Microsoft Excel and put the phrase in one column while the answer goes in the next column.)
a) used cars (as opposed to new cars)
b) home remodeling (versus doing nothing)
c) vacation planning services (versus doing the planning oneself)
d) new clothes (as opposed to used cars)
e) canned vegetables (as opposed to fresh vegetables)
Question 8
Classify the following as complements or substitutes and provide a justification if you feel it's warranted. (It might be easiest to create a table in Microsoft Excel and put the phrase in one column while the answer goes in the next column.)
a) dress shirts and ties
b) peanut butter and jelly
c) Nike brand shoes and Reebok brand shoes
d) beer and wine
e) cereal and milk
Question 9
Match each scenario with the panel that best describes what will happen to the market when the scenario occurs. Explain your answer in a manner that someone who hasn't taken economics before can understand and be sure to identify exactly what the market is that you're describing.
a) The FDA creates stricter safety standards that drugs must meet before being brought to market.
b) A well-known movie athlete serves as a Nike brand shoe spokesperson.
c) Earthquakes destroy key manufacturing buildings.
d) The USDA ordered the recall of steaks contaminated with E. coli.
e) Unusually good weather affects corn production in Iowa.
f) A new ban on cigarettes is instituted preventing them from being smoked in public areas.
g) New technology reduces the amount of steel required to manufacture trucks.
h) Smartphones are made using technology that increases battery life between charges.