Question 18 5 pts

Consider a competitive market for a product called X. The supply of X is relatively elastic and upward-sloping. The demand for X is relatively elastic and downward-sloping. Though the government is getting prepared to provide a subsidy to those firms that produce X, it knows that the demand for X is soon going to decline due to changes in consumer preferences and adverse demographic changes. Before we engage in careful empirical analysis, a theoretical comparative static analysis suggests that:

Group of answer choices

the equilibrium quantity and price of X both increase.

the equilibrium quantity and price of X both decline.

the equilibrium price for X declines, but the changes in equilibrium quantity remain ambiguous.

the equilibrium price for X declines, but its equilibrium quantity increases.

the equilibrium quantity for X declines, but the changes in equilibrium price remain ambiguous.

the equilibrium quantity for X declines, but its equilibrium price increases.

Question 19 5 pts

Now consider a competitive market for two more products: Y1 and Y2. The demand for these products are the same; and they are both relatively elastic. The supply for these products are not the same, however: the supply for Y1 is fully inelastic (i.e., changes in price has no impact on quantity supplied), while the supply for Y2 is relatively elastic (just like product X mentioned in Question No. 18).

Let us assume that products Y1 and Y2 initially have identical equilibrium prices and quantities. A sudden increase in demand for products Y1 and Y2:

Group of answer choices

has no effects on the equilibrium quantity for Y2, while it leads to a lower equilibrium quantity for Y1.

reduces the equilibrium quantity for Y1 and Y2.

has no effects on the equilibrium quantity for Y1, while it leads to greater equilibrium quantity for Y2.

has no effects on the equilibrium quantity for Y2, while it leads to greater equilibrium quantity for Y1.

has no effects on the equilibrium quantity for Y1, while it leads to a lower equilibrium quantity for Y2.

increases the equilibrium quantity for Y1 and Y2.

Question 20 5 pts

Consider the information in Question No. 19. Then go back to the initial equilibrium wherein products Y1 and Y2 initially have identical prices and quantities. A sudden increase in demand for products Y1 and Y2:

Group of answer choices

increases the equilibrium price for Y2 much more than the equilibrium price for Y1.

reduces the equilibrium price for Y1 much more than the equilibrium price for Y2.

increases the equilibrium price for Y1 much more than the equilibrium price for Y2.

has no impacts on the equilibrium prices for Y1 and Y2.

reduces the equilibrium price for Y2 much more than the equilibrium price for Y1.