Course: ECO 110

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Unit 2 Practice Problem

Unit 2 Practice Problem

Using supply and demand curves, indicate graphically the effect of each of the following changes in factors of the market on the equilibrium market price. State whether price and quantity increase, decrease, or stay the same. Also, state which curve shifts and which curve is moved along.

a.The effect on the market for bread of a bumper crop (very good crop) in the wheat growing regions of the country. (4pts.)

b.The effect on the auto market ( in the US as a whole) of imposing import restrictions (like a quota) on foreign producers of autos. (4pts.)

c.The effect on the market for solar energy units of a government plan to subsidize 25% of the cost (to the buyers)of individual home solar energy units. (4pts.)

d.The coal market consequences of new pollution regulations in coal processing that increase production costs by 10%. (4pts.)

e.The implication for the market for natural gas of the changes above in d. (4pts.)