Identify changes in market conditions and their effect on equilibrium price and
ID: 1186591 • Letter: I
Question
Identify changes in market conditions and their effect on equilibrium price and quantity for the following events:
Event 1: The wages for all dental assistants increase, increasing the costs of inputs.
Event 2: The government provides national dental insurance benefits for all U.S. citizens that cover 100% of the cost of all dental services. There are two effects of this policy. First, there will be an increase in the number of consumers of dental services. Second, there will be fewer dentists willing to provide dental services, resulting in some dentists removing themselves from the market entirely.
Explanation / Answer
Event 1 -> equilibrium price increases since cost of inputs increased Event 2 -> demand increases supply decreases,hence equilibrium price increases