Chapter 3. Applications of Demand and Supply
CRITICAL THINKING QUESTIONS
- Use the four-step process to analyze the impact of video-streaming on the equilibrium price and quantity of DVDs.
- Use the four-step process to analyze the impact of a reduction in tariffs on imports of a new technological product on the equilibrium price and quantity of a product that contains an older technology.
- Most government policy decisions have winners and losers. What are the effects of raising the minimum wage? It is more complex than simply, producers lose and workers gain? Who are the winners and who are the losers, and what exactly do they win and lose? To what extent does the policy change achieve its goals?
- Agricultural price supports result in governments holding large inventories of agricultural products. Why do you think the government cannot simply give the products away to those in need?
- Can you propose a policy that would induce the market to supply more rental housing units?
- What term would an economist use to describe what happens when a shopper gets a “good deal” on a product?
- Explain why voluntary transactions improve social welfare.
- Why would a free market never operate at a quantity greater than the equilibrium quantity? Hint: What would be required for a transaction to occur at that quantity?
