TABLE OF CONTENTS

Question 1 of 3

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You must read each slide, and complete any questions on the slide, in sequence.

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

Using the data from the table, find the equilibrium price and quantity.
1:36

Suppose the tires used on pickup trucks are found to be defective. Using the following graph, what do you expect will happen to demand and supply in the market for pickup trucks?

The graph depicts supply and demand curves. The horizontal axis is labeled ‘Quantity of trucks’ in millions, starting from 11 to 20 in single increments. The vertical axis is labeled ‘Price of truck’ in dollars, and starts from 15,000 to 45,000, in increments of 500. The original demand and supply curves are labeled D1 and S1 respectively. A decrease in demand is represented by a dotted line D2, which is to the left of D1. An increase in demand is represented by a dotted line D3, which is to the right of D1. Similarly, decreased supply is represented by S2, which is to the left of S1. An increased supply is represented by S3, which is to the right of S1.
0:43

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
25,000 18 15
30,000 16 16
35,000 14 17
40,000 12 18
Table

The new equilibrium price is $ . (no decimals)

The new equilibrium quantity is 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.
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.