Chapter 1. eFigure 2.14
eFigure
Isoquants
true
true
You must read each slide, and complete any questions on the slide, in sequence.
Question 1.1
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Correct! The new equilibrium price is lower than the original equilibrium price because demand has fallen at every price. Consumers are no longer willing to pay as much for the good. Since their willingness to pay has diminished the intersection with the (original) supply curve occurs at a lower price. The drop in price is not related to the slope of the demand curve, but only to the decrease in demand.
Incorrect. The new equilibrium price is lower than the original equilibrium price because demand has fallen at every price. Consumers are no longer willing to pay as much for the good. Since their willingness to pay has diminished the intersection with the (original) supply curve occurs at a lower price. The drop in price is not related to the slope of the demand curve, but only to the decrease in demand.
Question 1.2
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Correct! The inward shift in supply leads to an increase in price and a decrease in quantity. The inward shift of demand leads to a decrease in price and a decrease in quantity. Since the equilibrium quantity decreases with both shifts, we can definitively identify the change in quantity as a decrease. Depending on the magnitude of the shift of the two curves, the new equilibrium price may be higher, lower or equal to the initial price. For example, if the inward shift in supply were very small, the new equilibrium price would be lower than the initial price.
Incorrect. The inward shift in supply leads to an increase in price and a decrease in quantity. The inward shift of demand leads to a decrease in price and a decrease in quantity. Since the equilibrium quantity decreases with both shifts, we can definitively identify the change in quantity as a decrease. Depending on the magnitude of the shift of the two curves, the new equilibrium price may be higher, lower or equal to the initial price. For example, if the inward shift in supply were very small, the new equilibrium price would be lower than the initial price.
Question 1.3
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Correct! The inward shift in supply leads to an increase in price and a decrease in quantity. The inward shift of demand leads to a decrease in price and a decrease in quantity. Since the equilibrium quantity falls with both shifts, we can definitively identify the change in quantity as a decrease. The price changes move in opposite directions, making it impossible to precisely identify the direction of the change without information about the magnitude of the shifts.
Incorrect.The inward shift in supply leads to an increase in price and a decrease in quantity. The inward shift of demand leads to a decrease in price and a decrease in quantity. Since the equilibrium quantity falls with both shifts, we can definitively identify the change in quantity as a decrease. The price changes move in opposite directions, making it impossible to precisely identify the direction of the change without information about the magnitude of the shifts.