A long hot summer has increased the demand for beer; at the same time a tax is placed on alcohol. What can we say about the equilibrium price and quantity of alcohol?

AEquilibrium price rises; equilibrium quantity falls

BEquilibrium price rises; equilibrium quantity rises

CEquilibrium price rises; equilibrium quantity is unknown

DEquilibrium price falls: equilibrium quantity is unknown

with explanations

If environmental standards in an industry are more vigorously enforced and the industry has also been subject to bad publicity (example BSE) we would expect:

AEquilibrium price will decrease and equilibrium quantity will decrease

BEquilibrium price will increase and equilibrium quantity will decrease

CWe cannot say what will happen to equilibrium price but equilibrium quantity will decrease

DWe cannot say what will happen to equilibrium price and equilibrium quantity

A Budget Constraint

Arepresents the bundles of consumption that makes a consumer equally happy.

B.shows the consumption bundles that a consumer can afford.

Creflects the desire by consumers to increase their income.

Dshows the prices that a consumer chooses to pay for products he consumes.