Reference no: EM133184848

Chapter 4. Case Study: Supply, Demand, and Market Equilibrium

Case Study-1

Read the case "Two Ways to Reduce the Quantity of Smoking Demanded" from Chapter 4 "Supply, Demand, and Market Equilibrium"-"Principles of Macroeconomics".The case study presented in the chapter discussed cigarette taxes as a way to reduce smoking. Now think about the markets for other tobacco product such as cigars and chewing tobacco. and Answer the following Questions:

Questions:

1. Are these goods substitutes or compliments for cigarettes?

2. Using a supply and demand diagram, show what happens in the markets for cigars and chewing tobacco if the tax on cigarettes is increased.

3. If policy makers wanted to reduce total tobacco consumption, what policies could they combine with the cigarette tax?

4. How can we reduce the consumption of cigarettes in economics?

Chapter 6. Supply, Demand, and Government Policies

Case Study-2. 

Read the case "The Minimum Wage" from Chapter 6 "Supply, Demand, and Government Policies", "Principles of Macroeconomics".A case study discusses the federal minimum-wage law.

Questions:

1. Suppose the minimum wage is above the equilibrium wage in the market for unskilled labor. Using a supply and-demand diagram of the market for unskilled labor, show the market wage, the number of workers who are employed, and the number of workers who are unemployed. Also show the total wage payments to unskilled workers.

2. Now suppose the secretary of labor proposes an increase in the minimum wage. What effect would this increase have on employment? Does the change in employment depend on the elasticity of demand, the elasticity of supply, both elasticities, or neither?

3. What effect would this increase in the minimum wage have on unemployment? Does the change in unemployment depend on the elasticity of demand, the elasticity of supply, both elasticities, or neither?

4. If the demand for unskilled labor were inelastic, would the proposed increase in the minimum wage raise or lower total wage payments to unskilled workers? Would your answer change if the demand for unskilled labor were elastic?

Attachment:- chapter 4.rar

Attachment:- Chapter 6.rar