In the following three situations, the market is initially in equilibrium. Explain the changes in either supply or demand that result from each event. After each event described below, does a surplus or shortage exist at the original equilibrium price? What will happen to the equilibrium price as a result?
For each of the following, determine (i) the market in question; (ii) whether a shift in demand or supply occurred, the direction of the shift, and what induced the shift; and (iii) the effect of the shift on the equilibrium price and the equilibrium quantity.
When a new, faster computer chip is introduced, demand for computers using the older, slower chips decreases. Simultaneously, computer makers increase their production of computers containing the old chips in order to clear out their stocks of old chips.
Use a supply and demand diagram to illustrate how Uber drivers can cause prices to surge by taking coordinated breaks. Why is this strategy unlikely to work in New York, a large city with an established fleet of taxis?
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