Consider the market for electronic components ("chips") and assume that there is complete competition.1a) Graph the short-run market equilibrium in a supply-demand diagram. 1b) Due to entry restrictions, there are long waiting times and thus supply passports. Show what impact these supply bottlenecks have on the market for electric cars. For this purpose, graphically represent the situation with and without supply bottlenecks in a supply-demand diagram. Label the old and new market equilibrium as well as the new and old consumer and producer surplus. Be sure to include the necessary labels in your diagram. 1c) Since the effects on the market for electric cars related to the supply bottleneck are not desirable from a macroeconomic perspective, the government is considering intervening with economic policy measures. In your diagram from 1b), show why the effects addressed are not desirable from a macroeconomic perspective. Also explain this briefly in the text or annotated keywords.1d) The government now decides to introduce an effective, i.e. binding, minimum price for elect- ronic components. Show the effects of this measure on the market for electronic components.1e) Based on your answer from 1d) and, if applicable, also 1b) and 1c): Do you think that the binding minimum price mentioned is a reasonable measure to combat the above-mentioned effects on the market for electric cars? Give reasons for your answer.
Consider the market for electronic components ("chips") and assume that there is complete competition.
1a) Graph the short-run
1b) Due to entry restrictions, there are long waiting times and thus supply passports. Show what impact these supply bottlenecks have on the market for electric cars. For this purpose, graphically represent the situation with and without supply bottlenecks in a supply-demand diagram. Label the old and new market equilibrium as well as the new and old
1c) Since the effects on the market for electric cars related to the supply bottleneck are not desirable from a
1d) The government now decides to introduce an effective, i.e. binding, minimum price for elect- ronic components. Show the effects of this measure on the market for electronic components.
1e) Based on your answer from 1d) and, if applicable, also 1b) and 1c): Do you think that the binding minimum price mentioned is a reasonable measure to combat the above-mentioned effects on the market for electric cars? Give reasons for your answer.
Step by step
Solved in 2 steps with 4 images
