Chapter 1. Chapter 3
Step 1
Work It Out
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You must read each slide, and complete any questions on the slide, in sequence.
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 | Vj6nDdbsuD7BxjoAYzxGISSpPisex04a |
| 30,000 | 16 | 16 | TQucUm7RCbvQ6FgezsoihjPXSnfBSYqe |
| 35,000 | 14 | 17 | E8C0NVewhziXvKfN1wR71iLbD+qBMg1X |
| 40,000 | 12 | 18 | bpA6yHumbjM6Ch2+leZog2YeufMIlxFI |
Table
The new equilibrium price is $ nG/wELs7UVy4rDhKN/Uxj7o0NFNBw/7nwbS2+q2mk5A=. (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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