Reference no: EM1360932

  For each of the following draw a separate diagram to demonstrate the answer. (Hint: Remember the difference in a change in demand [supply] and a change in quantity demanded [supplied]. Don't shift both curves unless appropriate). Describe what happens to equilibrium price and sales. Explain why or why not this makes sense in the real world.

a. Show the effect on the U.S. new construction residential housing market in the event of a severe economic recession.

b. Show the effect on the U.S. air travel market if American Airlines unexpectedly folds (ceases operations) overnight.

c. Show the effect on the U.S. domestic car market if the price of foreign cars increases due to an exchange rate shock.

d. Show the effect on the market for large SUVs if the price of gasoline in the U.S. comes to rest at greater than $4 per gallon.

e. Show the effect of setting the price of Super Bowl tickets at a price lower than equilibrium price

Price Per Gallon $2 2.25 2.5 2.75 3.00 3.25 3.5
Quantity Demanded 26 25 24 23 22 21 20
Quantity Supplied 16 20 24 28 32 36 40

a) what is the equilibrium price?,

b) if supply at every price is reduced by 5 gallons, what will the new equilibrium price be?,

c) if the government freezes the price of gasoline at its initial equilibrium price, how much of a surplus or shortage will exist when supply is reduced as described above?, and

d) illustrate your answers on a graph.