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ECN 104 Lecture Notes - Lecture 5: Demand Curve, Determinant, Economic Equilibrium

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ivoryeagle238
13 Oct 2016
School
Ryerson University
Department
Economics
Course
ECN 104
Professor
Teresa Fung

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Document Summary

Introductory to microeconomics (week 5) (demand, supply and market equilibrium elasticity. D (cid:1373) (shift in d) (cid:1372) d no more changes in p. Unit d = s again at the new equilibrium. A surplus at the original price p1. A new equilibrium will be reached at p2, q2. S (cid:1371) (shift in s) -> d surplus (=q3 q1) P (cid:1371) qd (cid:1371) and qs (cid:1373) (movement along d and s) A shortage at the origin price p1. When both supply and demand change, the effect is a combination of the individual effects. If both demand and supply shift, one of either price or quantity cannot be predicted- the result is indeterminate. Example: d(cid:1371) + s(cid:1371) (shift in the same direction) The effect on p* will depend on the relative strength of the demand and supply shifts.

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Related Questions

With the changes in demand (D) and supply (S) in the following, what will happen to the equilibrium price (P) and equilibrium quantity (Q)?

1. D increases, S remains the same:

2. D decreases, S remains the same:

3. D remains the same, S increase:

4. D remains the same, S decreases:

Trade Policy.

The demand for cars in Home is q = 30 – P and the supply of cars in Home is q = P. The demand for cars in Foreign is q = 10 – P and the supply of cars in Foreign is q = P.

a) Calculate the autarky equilibrium price and quantity in each country.

b) Who is the importer of cars and who is the exporter?

c) Write the import demand for Home and the export supply for Foreign.

d) Find the equilibrium world price under free trade. What is the amount of cars traded between the two countries?

e) Suppose the country that is the importer imposes a tariff of $2 per unit on car imports. Find the new equilibrium world price under the tariff. What is the amount of cars traded between the two countries now? Show this in a graph with the import demand for Home and the export supply for Foreign.

f) Look at figure 1 for Home and fill in the table below (with letters, no numbers) with the consumer surplus, producer surplus, government revenue and total surplus before and after the tariff.

g) Look at figure 2 for Foreign and fill in the table below ((with letters, no numbers) with the consumer surplus, producer surplus, government revenue and total surplus before and after the tariff.

h) Does Home experience a terms of trade gain or loss as a result of the tariff? Does Foreign experience a terms of trade gain or loss as a result of the tariff?

I would greatly appreciate a systematic approach on how I should attack this information. I'm not sure what I'm solving for or what is simply given.


we have charted a demand curve D1 whose equation is Q = 27 - 3P. The equation for the supply curve S1 is Q = -5 + 5P. The resulting equilibrium price is $4 and quantity is 15 units (point 1).8 If we chart another, considerably more elastic, demand curve, D2, of the form Q = 55 - 10P, with the same supply curve, the equilib- rium point will be the same, Q = 15, and P = 4. Now, let us say that supply increases, and the supply curve S2 is of the form S = 0 + 5P. With the new supply curve, the equilibrium points for the two demand curves will no longer be the same. With D1 the price will be $3.375 and quantity 16.875 units (point 2). However, with D2 the result will be P = 3.667 and Q = 18.333 (point 3). The more elastic demand curve, D2, has resulted in a smaller price decrease but a larger quantity increase than D1, the less elastic curve.