Question 11
11. After several years of decline, the market for handmade acoustic guitars is making a
comeback. These guitars are usually made in small workshops employing relatively few
highly skilled luthiers. Assess the impact on the equilibrium price and quantity of handmade
acoustic guitars as a result of each of the following events. In your answers indicate which
curve(s) shift(s) and in which direction.
a. Environmentalists succeed in having the use of Brazilian rosewood banned in the United
States, forcing luthiers to seek out alternative, more costly woods.
b. A foreign producer reengineers the guitar-making process and floods the market with
identical guitars.
c. Music featuring handmade acoustic guitars makes a comeback as audiences tire of heavy
metal and alternative rock music.
d. The country goes into a deep recession and the income of the average American falls
sharply.
Solution 11
Question 12
12. Demand twisters: Sketch and explain the demand relationship in each of the following
statements.
a. I would never buy a Taylor Swift album! You couldn’t even give me one for nothing.
b. I generally buy a bit more coffee as the price falls. But once the price falls to $2 per
pound, I’ll buy out the entire stock of the supermarket.
c. I spend more on orange juice even as the price rises. (Does this mean that I must be
violating the law of demand?)
d. Due to a tuition rise, most students at a college find themselves with less disposable
income. Almost all of them eat more frequently at the school cafeteria and less often at
restaurants, even though prices at the cafeteria have risen, too. (This one requires that you
draw both the demand and the supply curves for school cafeteria meals.)
Solution 12
Question 13
13. Will Shakespeare is a struggling playwright in sixteenth-century London. As the price he
receives for writing a play increases, he is willing to write more plays. For the following
situations, use a diagram to illustrate how each event affects the equilibrium price and
quantity in the market for Shakespeare’s plays.
a. The playwright Christopher Marlowe, Shakespeare’s chief rival, is killed in a bar brawl.
b. The bubonic plague, a deadly infectious disease, breaks out in London.
c. To celebrate the defeat of the Spanish Armada, Queen Elizabeth declares several weeks of
festivities, which involves commissioning new plays.
Solution 13
Question 14
14. This year, the small town of Middling experiences a sudden doubling of the birth rate. After
three years, the birth rate returns to normal. Use a diagram to illustrate the effect of these
events on the following.
a. The market for an hour of babysitting services in Middling this year
b. The market for an hour of babysitting services 14 years into the future, after the birth rate
has returned to normal, by which time children born today are old enough to work as
babysitters
c. The market for an hour of babysitting services 30 years into the future, when children born
today are likely to be having children of their own
Solution 14
Question 15
15. Use a diagram to illustrate how each of the following events affects the equilibrium price and
quantity of pizza.
a. The price of mozzarella cheese rises.
b. The health hazards of hamburgers are widely publicized.
c. The price of tomato sauce falls.
d. The incomes of consumers rise, and pizza is an inferior good.
e. Consumers expect the price of pizza to fall next week.
Solution 15
Question 16
16. Although he was a prolific artist, Pablo Picasso painted only 1,000 canvases during his “Blue
Period.” Picasso is now dead, and all of his Blue Period works are currently on display in
museums and private galleries throughout Europe and the United States.
a. Draw a supply curve for Picasso Blue Period works. Why is this supply curve different
from ones you have seen?
b. Given the supply curve from part a, the price of a Picasso Blue Period work will be
entirely dependent on what factor(s)? Draw a diagram showing how the equilibrium price
of such a work is determined.
c. Suppose rich art collectors decide that it is essential to acquire Picasso Blue Period art for
their collections. Show the impact of this on the market for these paintings.
Solution 16
Question 17
17. Draw the appropriate curve in each of the following cases. Is it like or unlike the curves you
have seen so far? Explain.
a. The demand for cardiac bypass surgery, given that the government pays the full cost for
any patient
b. The demand for elective cosmetic plastic surgery, given that the patient pays the full cost
c. The supply of reproductions of Rembrandt paintings
Solution 17
Question 18
WORK IT OUT Interactive step-by-step help with solving this problem can be found
online.
18. 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
a. Plot the demand and supply curves using these schedules. Indicate the equilibrium price
and quantity on your diagram.
b. Suppose the tires used on pickup trucks are found to be defective. What would you expect
to happen in the market for pickup trucks? Show this on your diagram.
c. 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
and plot the new supply schedule and indicate the new equilibrium price and quantity on
your diagram.
[End Box]
Solution 18
