Changes in Equilibrium Macroeconomics 1. Suppose the U.S. economy moves out of a recession and incomes rise. What will happen to the equilibrium prices and quantities of normal goods? If price stays the same would that be equilibrium? Why or why not? What will eventually happen in the market? What happens to equilibrium price and quantity? Which quantity is affected and how do you know? Would your answer be the same if you were discussing inferior goods? Explain using supply/demand graphs. 2. Draw a graph showing the impact of students returning to campus in August on the market for pizza in a college town. If price stays the same would that be equilibrium? Why or why not? What will eventually happen in the market? What happens to equilibrium price and quantity? Which quantity is affected and how do you know? Explain using supply/demand graphs. 3. A new medical study reports that washing your hair everyday increases the probability of baldness. If price stays the same would that be equilibrium? Why or why not? What will eventually happen in the market? What happens to equilibrium price and quantity? Which quantity is affected and how do you know? Illustrate using S/D graph the effects of this report on the market for shampoo. 4. Suppose that the government creates a new subsidy for producers of smoke detectors. If price stays the same would that be equilibrium? Why or why not? What will eventually happen in the market? What happens to equilibrium price and quantity? Which quantity is affected and how do you know? Explain using a graph how this will impact the market for smoke detectors. 5. Fabric is used to make dresses. If the price of fabric increases what is likely to happen to the equilibrium price and quantity for dresses. If price stays the same would that be equilibrium? Why or why not? What will eventually happen in the market? What happens to equilibrium price and quantity? Which quantity is affected and how do you know? Illustrate using a graph