Problems

38 . Explain why the following statement is false: “In the goods market, no seller would be willing to sell for less than the equilibrium price.” 39 . Consider the demand for hamburgers. If the price of a substitute good (for example, hot dogs) increases and the price of a complement good (for example, hamburger buns) increases, can you tell for sure what will happen to the demand for hamburgers? Why or why not? Illustrate your answer with a graph. 40 . How do you suppose the demographics of an aging population of “Baby Boomers” in the United States will affect the demand for milk? Justify your answer. 41 . 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? 42 . Suppose there is a soda tax to curb obesity. What should a reduction in the soda tax do to the supply of sodas and to the equilibrium price and quantity? Can you show this graphically? Hint: Assume that the soda tax is collected from the sellers. 43 . Use the four-step process to analyze the impact of the advent of the iPod (or other portable digital music players) on the equilibrium price and quantity of the Sony Walkman (or other portable audio cassette players). 44 . 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. 45 . Suppose both of these events took place at the same time. Combine your analyses of the impacts of the iPod and the tariff reduction to determine the likely impact on the equilibrium price and quantity of Sony Walkman-type products. Show your answer graphically. 46 . 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? 47 . Agricultural price supports result in governments holding large inventories of agricultural products. Why do you think the government cannot simply give the products away to people experiencing poverty? 48 . Can you propose a policy that would induce the market to supply more rental housing units? 49 . What term would an economist use to describe what happens when a shopper gets a “good deal” on a product? 50 . Explain why voluntary transactions improve social welfare. 51 . Why would a free market never operate at a quantity greater than the equilibrium quantity? Hint: What would be required for a transaction to occur at that quantity?

Problems

52 . Review Figure 3.4 again. Suppose the price of gasoline is $1.00. Will the quantity demanded be lower or higher than at the equilibrium price of $1.40 per gallon? Will the quantity supplied be lower or higher? Is there a shortage or a surplus in the market? If so, of how much? 53 . Table 3.8 shows 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 TABLE 3.8 a. What is the quantity demanded and the quantity supplied at a price of $210? b. At what price is the quantity supplied equal to 48,000? c. Graph the demand and supply curve 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 equilibrium quantity? d. If the price was $120, what would the quantities demanded and supplied be? Would a shortage or surplus exist? If so, how large would the shortage or surplus be? 54 . The computer market in recent years has seen many more computers sell at much lower prices. What shift in demand or supply is most likely to explain this outcome? Sketch a demand and supply diagram and explain your reasoning for each. a. A rise in demand b. A fall in demand c. A rise in supply d. A fall in supply 55 . Table 3.9 illustrates the market's demand and supply for cheddar cheese. Graph the data and find the equilibrium. Next, create a table showing the change in quantity demanded or quantity supplied, and a graph of the new equilibrium, in each of the following situations: a. The price of milk, a key input for cheese production, rises, so that the supply decreases by 80 pounds at every price. b. A new study says that eating cheese is good for your health, so that demand increases by 20% at every price. Price per Pound Qd Qs $3.00 750 540 $3.20 700 600 $3.40 650 650 $3.60 620 700 TABLE 3.9 Price per Pound Qd Qs $3.80 600 720 $4.00 590 730 TABLE 3.9 56 . 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 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 it placed on all local entertainment businesses. The result is that the quantity supplied of movies at any given price increases by 10%. Price per Ticket Qd Qs $5.00 26 16 $6.00 24 18 $7.00 22 20 $8.00 21 21 $9.00 20 22 TABLE 3.10 57 . A low-income country decides to set a price ceiling on bread so it can make sure that bread is affordable to the poor. Table 3.11 provides the conditions of demand and supply. What are the equilibrium price and equilibrium quantity before the price ceiling? What will the excess demand or the shortage (that is, quantity demanded minus quantity supplied) be if the price ceiling is set at $2.40? At $2.00? At $3.60? Price Qd Qs $1.60 9,000 5,000 $2.00 8,500 5,500 $2.40 8,000 6,400 $2.80 7,500 7,500 $3.20 7,000 9,000 $3.60 6,500 11,000 $4.00 6,000 15,000 TABLE 3.11

FIGURE 4.1People often think of demand and supply in relation to goods, but labor markets, such as the nursing profession, can also apply to this analysis. (Credit: modification of "Hospital do Subúrbio" by Jaques Wagner Governador/Flickr Creative Commons, CC BY 2.0)

In this chapter, you will learn about:

• Demand and Supply at Work in Labor Markets
• Demand and Supply in Financial Markets
• The Market System as an Efficient Mechanism for Information

BRING IT HOME Baby Boomers Come of Age According to the 2020 Census, 22% of the U.S. population was 60 years old or older, which means that more than 74 million people have reached an age when they will need increased medical care. The baby boomer population, the group born between 1946 and 1964, is comprised of more than 71 million people who have already reached retirement age or will soon reach retirement. As this population grows older, they will be faced with common healthcare issues such as heart conditions, arthritis, and Alzheimer’s that may require hospitalization, long-term, or at-home nursing care. Aging baby boomers and advances in life-saving and life- extending technologies will increase the demand for healthcare and nursing. Additionally, the Affordable Care Act, which expands access to healthcare for millions of Americans, has further increased the demand.