New equilibrium price and quantity

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Reference no: EM132656860

Question 1:

a. Draw a figure depicting market equilibrium in the ice-cream market. Label the figure properly. Briefly explain the figure.

b. Draw a new figure depicting the following situation: The weather is suddenly unseasonably hot and at the same time the wage of ice-cream salespeople increases. Explain your figure, and report on your new equilibrium price and quantity.

Question 2:

Suppose, initially the Australian economy is at full employment (in other words the economy is at the potential GDP). Using AD-AS model, explain how would each of the following events affect the economy both in the immediate and in the long term.

a) A slowdown in China's economic growth due to the sub-prime crisis in the US.

b) Union wage settlements push the wage rate up.

c) An increase in consumer confidence.

Reference no: EM132656860

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