Unit 2 Assignment: Market Equilibrium and Taxes

Unit 2 Assignment: Market Equilibrium and Taxes Student Name: In this Assignment, you will examine different factors that affect supply and demand, and also supply and demand equations to calculate the equilibrium price and quantity. In addition, you will evaluate the effects of imposing per unit tax on market price, quantity and economic welfare. Instructions: Answer all of the following questions. You are required to follow proper APA format. Read the Criteria section below for more information before you begin this Assignment. In this Assignment, you will be assessed on the following outcome: MT445-2: Analyze the effects of changes in demand and supply on market equilibrium. 1 Analyze what would happen to equilibrium price and quantity in the market for Pepsi if the following occurred. Briefly explain your answers. 1 The price of Coke decreases. Coke and Pepsi are substitute goods thus, a price decrease in coke would cause the demand for coke to increase resulting in a rightward shift for coke on the demand curve CITATION Gre17 \l 1033 (Mankiw, 2017). The quantity demanded for Pepsi decreases due to its relative high price compared to Coke. 2 Average household income falls from $50,000 to $43,000 Holding other things constant (ceteris paribus), a reduction in income by $7,000 will cause a decline in the quantity demanded for Pepsi. In this case, Pepsi is a normal good whose demand increases when income rises and decreases with a fall in income. 3 There are improvements in soft-drink bottling technology. This will attract people to buying Pepsi due to preference towards the improved bottle. Hence, skewed preference for Pepsi will raise the demand for it thus affecting the quantity demanded. However, this positive change will only occur if...