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Chapter 4

ECON 2G03 Chapter Notes - Chapter 4: Economic Equilibrium


Department
Economics
Course Code
ECON 2G03
Professor
Hannah Holmes
Chapter
4

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CHAPTER 4 PROBLEMS AND APPLICATIONS ANSWERS
For questions 3 and 5 I have given the shifts and the change in P and Q. Of course in
your answers, you should be drawing the diagrams for each part. Also, consider each
part separately.
3. a. D increases; P and Q both increase.
b. S decreases; P increases and Q decreases.
c. S increases; P decreases and Q increases.
d. D increases; P and Q both increase.
e. D decreases: P and Q both decrease.
5. a. S decreases; P rises and Q falls.
b. D decreases; P and Q both fall.
c. D increases; P and Q both rise.
d. S increases; P falls and Q rises.
7. Look at the markets sequentially and do not look back – so first, what happens to
equilibrium price and quantity in the market for ketchup when the price of hot
dogs rises? Next, given the change in P and Q for ketchup, what happens to the
market for tomatoes? Keep going with the last two markets, in order.
10. To answer this question completely, you need to draw 4 diagrams for part (a) and
4 diagrams for part (b).
12. This is a great question and it’s harder than the others. Read carefully.
13. P = $0.20
Q = 1540
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