micro economics
For each event, illustrate the impact on the relevant market and determine what will happen to the equilibrium price and quantity in that market.
Event
Market for:
Show which curve shifts
Equilibrium price rise or fall?
Equilibrium quantity increase or decrease?
Economic growth is expected to improve in the next two quarters.
Aluminum
Plastics production capacity has increased.
Plastics
The Japanese government has decided to subsidize its domestic automobile producers with stimulus money.
Automobiles
Manufacturers who use plastic as an input have access to cheaper plastic.
Manufactured goods that use plastic as an input
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Answers
The demand curve for plastics would shift to the right, causing the equilibrium price of plastic to decrease and the equilibrium quantity to increase. For manufactured goods that use plastic as an input, the decrease in price of plastics will have a positive effect on the demand, causing the demand curve to shift to the right. This will result in a higher equilibrium price and a higher equilibrium quantity.
