6 Which of the following Ceteris Paribus would cause an ambi

6. Which of the following, Ceteris Paribus, would cause an ambiguous change in the equilibrium price (P*) and an increase in the equilibrium quantity (Q*) of good X. For each, simply state YES or NO.

**Note that both the increase and the ambiguous change have to be satisfied and you cannot say YES to the first part and NO to the second part. It is strongly suggested that you draw the graphs to work out those shifts. You do not need to send your graphs and you do not need to send any explanations. However, if you do, you may qualify for partial credit.

a. The wages of workers who produce good X increase and the incomes of buyers of good X decrease. Good X is an inferior good.

b. Medical journals announce that consuming good X is good for your health and a technological improvement in the production of good X occurs.

c. The price of good Z, a substitute of good X, decreases and the number of suppliers of good X increases.

d. A disastrous weather destroys good X and the number of buyers of good X increases.

e. The price of a major input in the production of good X decreases and the income of buyers of good X increase. Good X is a normal good.

Solution

A Yes. As income decreases people consume more x so that demand for labour increases and so does wages of labour used in X

B Yes. News is journals will cause demand to rise which in turn increase price. But technological change will cause price to fall. Since there is no information on which effect is greater we can\'t say whether price rises or falls but consumption does increase

C No. As no. Of suppliers increase price will fall. Thus there is no ambiguity

D No.Due to disastrous weather supply will fall resulting in rise in price. Similarly due to rise in demand price will rise. So there is no ambiguity. Demand increases

Can answer only 4 parts according to chegg policy. Please send other parts as separate question