Problem 1
For each of the following, draw a separate diagram for each of the following markets.
Demonstrate what happens to the Supply and Demand graphs with your answer. Describe what
happens to equilibrium price and quantity.
(Hint: Remember the difference in a change in demand [or supply] and a change in quantity
demanded [or supplied]. Also, not every event requires a shifting of both curves - unless
appropriate).
A. U.S. new construction residential housing market.
Event: A severe economic recession such as the country recently experienced reduces incomes
nationwide.
B. U.S. air travel market.
Event: American Airlines unexpectedly folds (ceases operations) overnight.
C. The U.S. domestic car market.
Event: The price of foreign cars increases due to an exchange rate shock.
D. The market for large SUVs.
Event: A change in the price of gasoline in the U.S. rises by 33 cents each week for 6
consecutive weeks, then stabilizes at the new high price.
Solution
Hi as I am unable to paste graphs here you can find your answer at below mentioned link file
https://drive.google.com/open?id=0B5Bx-cVuQCgaOW4yTGwtUS15LWM&authuser=0