ONLINECO 

Exercises 1-6

 

Chapter 4.The market forces of Supply and Demand. Gregory Mankiw. Principles of Economics.

 

1. Explain each of the following statements using supply and demand diagrams. A. When a cold snap hits Florida, the price of orange juice rises in supermarkets throughout the country. B. When the weather turns warm in New England every summer, the prices of hotel rooms in Caribbean resorts plummet. C. When a war breaks out in the Middle East, the price of gasoline rises, while the price of a used Cadillac falls.

 

2. “An Increase in the demand for notebooks raises the quantity of notebooks demanded, but not the quantity supplied”. Is this statement true or false? Explain

 

3. Consider the market for minivans. For each of the events listed here, identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply are affected. Also indicate whether demand or supply is increased or decreased. Then show the effect on the price and quantity of minivans.A. People decide to have more children. b. A strike by steelworkers raises steel prices. c. Engineers develop new automated machinery for the production of minivans. d.The price of station wagon rises. e. A stock-market crash lowers people’s wealth.

 

4. During the 1990s, technological advance reduced the cost of computer chips. How do you think this affected the market for computers? For computer software? For type writers?

 

5. Using supply-and-demand diagram, show the effect of the following events on the market for sweatshirts.A. A hurricane in South Carolina damages the cotton crop. b.The price of leather jackets falls. c. All colleges require morning calisthenics in appropriate attire d. New kitting machines are invented.

 

6. Suppose that in year 2005 the number of births is temporarily high. How does this baby boom affect the price of baby-sitting services in 2010 and 2020 (Hint: 5-year-olds need baby-sitters, whereas 15-year-olds can be baby sitters)