Reference no: EM132444950

Questions:

1) Draw a supply-demand diagram of the market for rental apartments in Lowell in the neighborhoods surrounding the university. Illustrate the effect on monthly rents of a sharp decrease in state support of public higher education, combined with large increases in tuition and curriculum fees (assume that room and board fees in the dorms remain unchanged). Explain your diagram.

2a) Draw a supply - demand diagram to illustrate the effect on prices of new automobiles of a regulation which imposed stricter safety standards on new passenger vehicles.

2b) Illustrate on your graph the effect on the market for new cars of a regulation which imposed stricter auto emissions standards on older automobiles than are currently in force.

3)Several years ago an auto industry analyst reported: "Expect big discounts in the U.S. from the auto industry in the coming months as recession in the Far East continues to dampen demand there. In recent years, investments in new technology have lowered production costs, so firms have room to lower prices auto industry analysts said."

Is the above quote referring to a shift in supply conditions or demand conditions in the U.S. auto market? Draw a supply-demand diagram to illustrate.

4) Suppose that war broke out in the Middle East and oil pipelines to the Persian gulf from the warring states were destroyed. What would you expect to happen to the price of natural gas? Explain your answer and illustrate it with appropriate supply demand diagrams.

5) Suppose the government decided to tax gasoline in order to discourage its use because of its negative environmental impacts. Draw a supply-demand diagram to illustrate the effect of imposing a $1.50 per gallon tax on gasoline. Would the price of gasoline rise by more than, less than, or exactly $1.50?

6) Draw a supply-demand diagram to illustrate the effect on the market for Mexican salsa of a sharp decline in the price of tortilla chips. Explain your reasoning.