There are three questions related to demand and supply. 1. What’s your answer ab
ID: 1133638 • Letter: T
Question
There are three questions related to demand and supply.
1. What’s your answer about the equilibrium change from an event which decreases both demand and supply? You don’t need to provide graph here. Just describe the curve shifts and how the equilibrium price and equilibrium quantity change.
2. In your opinion, if the government imposes unit sales tax (i.e. $ tax per unit sold) on a product, will the market equilibrium change? Which one, demand or supply will shift? Increase or decrease? Will new tax cause “disequilibrium”? Please explain your answer. No graph is required.
3. Electric car technology has been improving and the U.S. shale gas oil supply has been increasing. What will be the impact on the crude oil market price? What will be the impact on the gas-burning auto market price? Explain your answer briefly.
Explanation / Answer
1.A decrease in demand lowers price and a decrease in supply raises price.Both these simultaneous effect will cause the price to remain the same but quantity will fall.
2.Sales tax is imposed on the supplier as it is imposed on per unit sales of the commodity.A sales tax will shift the supply curve to the left(supply will decrease)increasing price and decreasing quantity.It will result in disequilibrium.
3.As a result of rise in supply the crude oil price will fall.
Due to improvement in electric car technology,supply of electric cars will rise causing its price to fall.Electric car and gas burning cars are substitutes.Due to fall in the price of electric cars,the demand for gas burning cars will fall causing its price to fall.