Introductory Microeconomics Assignment Example | Topics and Well Written Essays - 1000 words

Introductory Microeconomics - Assignment Examplec) The concern is that the observation of falling prices of raptus could instead be caused by add in come forth since number of operators has increased. This is shown in the diagram below. Since thither has been an increase in lend of shipping services for each given price, this implies an outward shift of the supply curve. As a result the Price drops from P1 to P2. The concern is that this may have been the reason behind the discover drop in prices. Q2. a) No, this would non be enough information to identify that the reason for the observed movements were only if due to demand font factors. The rise in oil prices could increase wine prices through supply side effects as well. For instance if the increase in oil prices leads to a significant increase in transport costs, then this rise will be reflected in wine prices as well. that this is a supply side effect. However, since the correlation was as strong as 90%, it should be v enture that there was both a demand rise as well as a spill in supply together to generate the effect. Particularly, it should be noned that a rise in the consumer price index implies a steady rise in the prices of inputs for production of wine as well. Thus, taking these factors in consideration, it is not possible to conclude that the observed correlation stems entirely from demand side factors. ... However, we could take more amend guesses given this set of information. For instance, if the observed transactions data showed that a negative relation ship betwixt prices and quantities traded, it would be evident that the traced curve was a demand curve. Thus the changes that have caused the prices to fall were supply side effects. On the other hand if we observed a positive relationship, i.e., if we observe as prices rise, so do the traded amounts, the conclusion will be that it is the demand that is changing. But, it should be noted that such clean and precise one-to-one mapp ings are unlikely, and the only realistic conclusion can be that the observed changes reflect a gang of both demand and supply side factors. Q3.a) The situation may lead to a market clangour since there is an exorbitance supply of permits. This excess supply will lead to falling prices. And since demands are not rising for permits given the situation of the economy, if there is sufficiently high excess supply this will driveway the market price down to very low levels and thus cause a market crash. Q3.b) The liking was to create high enough prices so that switching over to low coke fuels. However, because of the low demands and excess supplies, market prices of permits have not risen to the degree that would make it profitable for producers to switch to low carbon fuels. As a result, the ETS has been unsuccessful in inducing firms to switch from using high-carbon to using low-carbon fuels. Q3.c) As shown in the diagram, assume that the government sets the reserve price at Pr. I f the market operated freely, the equilibrium price would be Po and the equilibrium quantity would be Qo. By setting the reserve price at Pr, the