Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedApplying the Supply-and-Demand ModelJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.01a How the Effect of a Supply Shock Depends on the Shape of the Demand Curvep, $ per kg(a)215 2201760Q, Million kg of pork per year3.553.30S1D1S2e1e2Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.01b How the Effect of a Supply Shock Depends on the Shape of the Demand Curve(b)p, $ per kg2201760Q, Million kg of pork per year3.6753.30S1S2D2e1e2Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.01c How the Effect of a Supply Shock Depends on the Shape of the Demand Curve(c)p, $ per kg2202051760Q, Million kg of pork per year3.30S1S2D3e1e2Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.02 Elasticity Along the Pork Demand Curvep, $ per kga/2 = 143a/5 = 57.2Da = 286220Q, Million kg of pork per year011.44a/b = 14.303.30a/(2b) = 7.15Elastic: ε < –1ε = –4Unitary: ε = –1ε = – 0.3Inelastic: 0 > ε > –1PerfectlyinelasticPerfectly elasticJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.03a Vertical and Horizontal Demand Curvesp, Price per unit(a) Perfectly Elastic DemandQ, Units pertime periodp *Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.03b Vertical and Horizontal Demand Curves(b) Perfectly Inelastic Demandp, Price per unitQ * Q, Units pertime periodJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.03c Vertical and Horizontal Demand Curves(c) Individual’s Demand for Insulin*p, Price ofinsulin dose* Q, Insulindoses per daypQJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.04 Elasticity Along the Pork Supply Curvep, $ per kg220 260176Sη≈ 0.71η≈ 0.66η≈ 0.6η≈ 0.5300Q, Million kg of pork per year03.302.204.305.30Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.05 Effect of a $1.05 Specific Tax on the Pork Market Collected from Producersp, $ per kgQ2= 206 Q1= 220176T=$216.3 millionQ, Million kg of pork per year0p2= 4.00p1= 3.30p2–τ= 2.95τ= $1.05S1e1e2S2DJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedSolved Problem 3.1p, Price per unitQ, Quantity per time periodQ1Q2p1p2= p1+ 1S1S2e1e2Dτ= $1Jeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights Reserved= $1.05= 2.95Figure 3.06 Effect of a $1.05 Specific Tax on Pork Collected from Consumersp, $ per kgQ2= 206 Q1= 220176= $216.3 millionQ, Million kg of pork per year0p2= 4.00p1= 3.30p2–τ= $1.05Wedge, τD1D2e1e2STτJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedFigure 3.07 A Comparison of an Ad Valorem and a Specific Tax on Porkp, $ per kgQ2= 206 Q1= 220176T=$216.3 millionQ, Million kg of pork per year0p2= 4.00p1= 3.30p2–τ= 2.95e1e2DaDsSDJeffrey M. Perloff, Microeconomics, © 2001 Addison Wesley Longman, Inc., All Rights ReservedProblem Solved 3.2p, Price per unitQ* Q, Quantity per time period(1 –
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