Macroeconomics 12th Edition by Michael Parkin

Exercise 9

In Problem 1, a fire destroys some factories that produce gum and the quantity of gum supplied decreases by 40 million packs a week at each price.
a. Explain what happens in the market for gum and draw a graph to illustrate the changes.
b. At the same time as the fire, the teenage population increases and the quantity of gum demanded increases by 40 million packs a week at each price. What is the new market equilibrium Show the changes on your graph.
Problem 1
The demand and supply schedules for gum are

a. Suppose that the price of gum is 70^ a pack. Describe the situation in the gum market and explain how the price adjusts.
b. Suppose that the price of gum is 30^ a pack. Describe the situation in the gum market and explain how the price adjusts.