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Macmillan Higher Econ Chapter 4 Review Questions Answers

1.

Changes in the wage charge per unit (the cost of labor) cause a movement forth the demand bend. A modify in anything else that affects demand for labor (due east.1000., changes in output, changes in the production process that utilise more than or less labor, authorities regulation) causes a shift in the demand curve.

two.

Changes in the wage rate (the toll of labor) cause a movement along the supply curve. A change in anything else that affects supply of labor (due east.k., changes in how desirable the job is perceived to exist, government policy to promote training in the field) causes a shift in the supply curve.

3.

Since a living wage is a suggested minimum wage, it acts like a cost floor (bold, of form, that information technology is followed). If the living wage is binding, it will cause an excess supply of labor at that wage rate.

4.

Changes in the interest rate (i.east., the cost of financial capital) cause a motion along the need curve. A change in annihilation else (non-toll variable) that affects need for fiscal uppercase (eastward.g., changes in confidence nigh the future, changes in needs for borrowing) would shift the demand curve.

5.

Changes in the interest rate (i.e., the price of fiscal capital) cause a motion along the supply curve. A change in anything else that affects the supply of financial capital (a non-price variable) such every bit income or time to come needs would shift the supply curve.

vi.

If market place interest rates stay in their normal range, an interest rate limit of 35% would non be binding. If the equilibrium involvement rate rose above 35%, the interest rate would be capped at that rate, and the quantity of loans would be lower than the equilibrium quantity, causing a shortage of loans.

vii.

b and c will lead to a fall in interest rates. At a lower demand, lenders will not be able to charge as much, and with more available lenders, competition for borrowers volition bulldoze rates down.

viii.

a and c will increment the quantity of loans. More people who want to borrow volition result in more loans beingness given, as will more people who desire to lend.

9.

A price floor prevents a price from falling beneath a certain level, only has no effect on prices above that level. It volition accept its biggest consequence in creating excess supply (as measured by the unabridged surface area inside the dotted lines on the graph, from D to S) if information technology is substantially above the equilibrium cost. This is illustrated in the post-obit figure.

The graph shows a dashed price floor line substanitally above the equilibrium price with excess supply beneath the equilibrium.

It volition have a lesser consequence if information technology is slightly above the equilibrium price. This is illustrated in the next figure.

The graph shows a dashed price floor line that is just slightly above equilibrium.

It will have no effect if information technology is set either slightly or essentially below the equilibrium price, since an equilibrium price in a higher place a price floor will non exist affected by that toll floor. The following effigy illustrates these situations.

The left image shows a dashed price floor line that is just slightly below equilibrium. The right image shows a dashed price floor line that is substantially below equilibrium.

10.

A price ceiling prevents a price from rising above a certain level, simply has no effect on prices below that level. It will take its biggest effect in creating excess demand if it is essentially below the equilibrium toll. The post-obit figure illustrates these situations.

The left image shows a dashed price ceiling line that is substantially below equilibrium. The right image shows a dashed price floor line that is just slightly below equilibrium.

When the cost ceiling is set substantially or slightly in a higher place the equilibrium price, it will have no effect on creating excess need. The following figure illustrates these situations.

The left image shows a dashed price ceiling line that is substantially above equilibrium. The right image shows a dashed price ceiling line that is just slightly above equilibrium.

xi.

Neither. A shift in demand or supply means that at every toll, either a greater or a lower quantity is demanded or supplied. A toll floor does non shift a demand curve or a supply curve. Notwithstanding, if the price floor is set to a higher place the equilibrium, it will crusade the quantity supplied on the supply bend to be greater than the quantity demanded on the need curve, leading to backlog supply.

12.

Neither. A shift in need or supply means that at every price, either a greater or a lower quantity is demanded or supplied. A toll ceiling does not shift a demand curve or a supply curve. However, if the cost ceiling is set up beneath the equilibrium, information technology will cause the quantity demanded on the need bend to be greater than the quantity supplied on the supply bend, leading to backlog demand.

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Source: https://openstax.org/books/principles-microeconomics-2e/pages/chapter-4

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