01.06MARKET EQUILIBRIUM, DISEQUILIBRIUM, AND CHANGES IN EQUILIBRIUM

For each scenario below, draw an accurately labeled market graph of all axes, curves, and equilibria points. Be sure to use arrows to indicate the direction of shifts in supply and/or demand.

a) The market for automobile tires after the price of rubber increases.

b) The market for a hardcover book in which the publisher overestimated demand, charging more than the equilibrium price. (Instead of a shift, indicate the quantity of the shortage or surplus of the book.)

c) The market for a normal consumer good after a significant rise in average income.

d) The market for infant cribs after a significant decline in the birth rate.

For the following three parts, answer each question completely, directly, and succinctly.

e) If the demand for a good decreases, ceteris paribus, what will happen to the equilibrium price?

f) What would happen to the equilibrium price and equilibrium quantity of a good after the government subsidized its production at the same time that demand increased? Explain.

g) Imagine the supplier of a small handcrafted good does not know that a major social media influencer has praised its product's high quality. What would be the first disequilibrium state of this supplier's good? Explain.