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ty. blackboard.com/webapps/blackboard/execute/announcement?course id-167361 18context-course entry Use the Hill method for each these exercises The price of tea is held above equilibrium by the govemment What happens to the price and quantity of tea The price of tea is held below equilibrium by the government What happens to t the price and quantity of tea? The price of tea increases. What happens to the price and quantity of coffee The price of tea decreases What happens to the price and quantity of tea biscuits? he government gives out a tax rebate. What happens to the price and quantity of all normal go The govermment gives out a tax rebate. What happens to the price and quantity of all inferior goods? People expect the price of People start preferring Tea to coffee. What happens to the There is a baby boom. What happens to the price and quantity of diapers A new toy store opens. What happens to the price and quantity of tovs A new machine is invented to produce toys faster. What happens to the price and Quantity of tovsExplanation / Answer
1) When the price of tea is held above the equilibrium or there is price ceiling,this would mean that the producers in order to maximize the profits will supply more quantities so there will be an excess supply or surplus than the quantity demanded.The quantity demanded will decrease as a result whie the price rises.
2) When the price is held below the equilibrium or there is price floor,there would be an excess demand or shortage, as the equilibrium price is higher than the current price,people will demand more good while the quantity supplied will reduce as price decreases.
3) As tea and coffee are substitutes goods,the rise in prices of tea will shift the demand curve to the right for the quantity of coffee meaning that the quantity demanded for coffee will increase and as there would be a shortage at the original price,the rise in demand will increase the price as well.
4) As tea and tea biscuits are complementary goods,any decrease in price of tea will increase the demand for tea biscuits.The prices of complimentary goods are related in a manner if there is a decrease in prices of one good so the prices of other good will decrease as well.
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