Chapter 1. Chapter 3

Step 1

Work It Out
Work It Out
Chapter 3
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true

Question

The accompanying table gives the annual U.S. demand and supply schedules for pickup trucks.

Price of truck Quantity of trucks demanded (millions) Quantity of trucks supplied (millions)
$20,000 20 14
25,000 18 15
30,000 16 16
35,000 14 17
40,000 12 18
Table
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Step 2

Question

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Step 3

Question

Suppose that the U. S. Department of Transportation imposes costly regulations on manufacturers that cause them to reduce supply by one- third at any given price. Calculate the new supply schedule by filling in the blanks in this table (quantities should include one decimal place, i.e. 15.0). Based on your findings, identify the new equilibrium price and the new equilibrium quantity.

Price of truck Quantity of trucks demanded (millions) Quantity of trucks supplied (millions) Quantity of trucks supplied after regulations (millions)
$20,000 20 14 +HDdNZc+tR5DKVeMdGHuR9I3rZEAwwb5
25,000 18 15 gRkXmCA3v2aib+3eu8vITG+Kcqe5S8EmfeTcYw==
30,000 16 16 TQucUm7RCbvQ6FgezsoihjPXSnfBSYqe
35,000 14 17 E8C0NVewhziXvKfN1wR71iLbD+qBMg1X
40,000 12 18 fTcT+0MWEll9BrYG7wE2x1EZnwcDF9wU38jFVQ==
Table

The new equilibrium price is $ +whcSiaqViEj1VK5osTZv23tCl0A7KI7xXiFzaFvPEXYyw4jCkJfiA==. (no decimals)

The new equilibrium quantity is DDH6Tw1RFEk= million. (no decimals)

To find the correct answers you will multiply quantity supplied by two-thirds for all the prices listed. So at a price of $20,000 the manufactures will supply a quantity of 14*2/3 or 9.3 million trucks. At a price of $25,000 the manufacturers will supply a quantity of 15*2/3 or 10.0 million trucks, and so on. The new equilibrium price and quantity will be found where quantity demand equals the new quantity supplied. This occurs at a price of $40,000 and a quantity of 12 million trucks. For further review, see section “What Happens When the Supply Cure Shifts.”
Suppose that the U. S. Department of Transportation imposes costly regulations on manufacturers that cause them to reduce supply by one- third at any given price. Calculate the new supply schedule by filling in the blanks in this table (quantities should include one decimal place, i.e. 15.0). Based on your findings, identify the new equilibrium price and the new equilibrium quantity.
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