This document outlines 4 economics problems involving changes in supply and demand in different markets and how those changes would affect the equilibrium price and quantity. Specifically, it asks the reader to draw supply and demand graphs showing how: A) A recession reduces housing demand. B) An airline folding decreases air travel supply. C) Foreign car prices rising shifts demand for domestic cars. D) Gradual gasoline price increases first shifts demand for SUVs then a new equilibrium is reached. The document provides context and events to analyze for each market.
Problem 1 For each of the following, draw a separate diagram for e.pdf
1. 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