Besankoj&jBraeutigamj–jMicroeconomics,j5thjedition SolutionsjManual
Chapter 1 j
Analyzing Economic Problems
j j
SolutionsjtojReviewjQuestions
1. Whatjisjthejdifferencejbetweenjmicroeconomicsjandjmacroeconomics?
Microeconomicsjstudiesjthejeconomicjbehaviorjofjindividualjeconomicjdecisionjmakers,jsuchjasjajc
onsumer,jajworker,jajfirm,jorjajmanager.j Macroeconomicsjstudiesjhowjanjentirejnationaljeconomyj
performs,jexaminingjsuchjtopicsjasjthejaggregatejlevelsjofjincomejandjemployment,jthejlevelsjofjin
terestjratesjandjprices,jthejratejofjinflation,jandjthejnaturejofjbusinessjcycles.
2. Whyjisjeconomicsjoftenjdescribedjasjthejsciencejofjconstrainedjchoice?
Whilejourjwantsjforjgoodsjandjservicesjarejunlimited,jthejresourcesjnecessaryjtojproducejthosejgoo
dsjandjservices,jsuchjasjlabor,jmanagerialjtalent,jcapital,jandjrawjmaterials,jarej“scarce”jbecausejth
eirjsupplyjisjlimited.j Thisjscarcityjimpliesjthatjwejarejconstrainedjinjthejchoicesjwejcanjmakejaboutj
whichjgoodsjandjservicesjtojproduce.j Thus,jeconomicsjisjoftenjdescribedjasjthejsciencejofjconstrain
edjchoice.
3. Howjdoesjthejtooljofjconstrainedjoptimizationjhelpjdecisionjmakersjmakejchoices?j
Whatjrolesjdojthejobjectivejfunctionjandjconstraintsjplayjinjajmodeljofjconstrainedjoptimiz
ation?
Constrainedjoptimizationjallowsjthejdecisionjmakerjtojselectjthejbestj(optimal)jalternativejwhilejac
countingjforjanyjpossiblejlimitationsjorjrestrictionsjonjthejchoices.j Thejobjectivejfunctionjrepresen
tsjthejrelationshipjtojbejmaximizedjorjminimized.j Forjexample,jajfirm’sjprofitjmightjbejthejobjectiv
ejfunctionjandjalljchoicesjwilljbejevaluatedjinjthejprofitjfunctionjtojdeterminejwhichjyieldsjthejhighe
stjprofit.j Thejconstraintsjplacejlimitationsjonjthejchoicejthejdecisionjmakerjcanjselectjandjdefinesjth
ejsetjofjalternativesjfromjwhichjthejbestjwilljbejchosen.
4. Supposejthejmarketjforjwheatjisjcompetitive,jwithjanjupward-
slopingjsupplyjcurve,jajdownward-
slopingjdemandjcurve,jandjanjequilibriumjpricejofj$4.00jperjbushel.jWhyjwouldjajhigherjpr
icej(e.g.,j$5.00jperjbushel)jnotjbejanjequilibriumjprice?jWhyjwouldjajlowerjpricej(e.g.,j$2.50j
perjbushel)jnotjbejanjequilibriumjprice?
Ifjthejpricejinjthejmarketjwasjabovejthejequilibriumjprice,jconsumersjwouldjbejwillingjtojpurchasejf
ewerjunitsjthanjsuppliersjwouldjbejwillingjtojsell,jcreatingjanjexcessjsupply.j Asjsuppliersjrealizejth
eyjarejnotjsellingjthejunitsjtheyjhavejmadejavailable,jsellersjwilljbidjdownjthe
Copyrightj©j2014jJohnjWileyj&jSons,jInc. Chapterj1j-j1
,Besankoj&jBraeutigamj–jMicroeconomics,j5thjedition SolutionsjManual
pricejtojenticejmorejconsumersjtojpurchasejtheirjgoodsjorjservices.j Byjdefinition,jequilibriumjisjajst
atejthatjwilljremainjunchangedjasjlongjasjexogenousjfactorsjremainjunchanged.j Sincejinjthisjcasejs
uppliersjwilljlowerjtheirjprice,jthisjhighjpricejcannotjbejanjequilibrium.
Whenjthejpricejisjbelowjthejequilibriumjprice,jconsumersjwilljdemandjmorejunitsjthanjsuppliersjha
vejmadejavailable.j Thisjexcessjdemandjwilljenticejconsumersjtojbidjupjthejpricesjtojpurchasejthejli
mitedjunitsjavailable.j Sincejthejpricejwilljchange,jitjcannotjbejanjequilibrium.
5. Whatjisjthejdifferencejbetweenjanjexogenousjvariablejandjanjendogenousjvariableji
njanjeconomicjmodel?jWouldjitjeverjbejusefuljtojconstructjajmodeljthatjcontainedjonlyjexo
genousjvariablesj(andjnojendogenousjvariables)?
Exogenousjvariablesjarejtakenjasjgivenjinjanjeconomicjmodel,ji.e.,jtheyjarejdeterminedjbyjsomejpro
cessjoutsidejthejmodel,jwhilejendogenousjvariablesjarejdeterminedjwithinjthejeconomicjmodeljbein
gjstudied.
Anjeconomicjmodeljthatjcontainedjnojendogenousjvariablesjwouldjnotjbejveryjinteresting.j Withjnoj
endogenousjvariables,jnothingjwouldjbejdeterminedjbyjthejmodeljsojitjwouldjnotjservejmuchjpurpo
se.
6. Whyjdojeconomistsjdojcomparativejstaticsjanalysis?jWhatjrolejdojendogenousjv
ariablesjandjexogenousjvariablesjplayjinjcomparativejstaticsjanalysis?
Comparativejstaticsjanalysesjarejperformedjtojdeterminejhowjthejlevelsjofjendogenousjvariablesjch
angejasjsomejexogenousjvariablejisjchanged.j Thisjtypejofjanalysisjisjveryjimportantjsincejinjthejrea
ljworldjthejexogenousjvariables,jsuchjasjweather,jpolicyjtools,jetc.jarejalwaysjchangingjandjitjisjuse
fuljtojknowjhowjchangesjinjthesejvariablesjaffectjthejlevelsjofjother,jendogenous,jvariables.j Anjexa
mplejofjcomparativejstaticsjanalysisjwouldjbejaskingjthejquestion:jIfjextraordinarilyjlowjrainfallj(a
njexogenousjvariable)jcausesjaj30jpercentjreductionjinjcornjsupply,jbyjhowjmuchjwilljthejmarketjpri
cejforjcornj(anjendogenousjvariable)jincrease?
7. Whatjisjthejdifferencejbetweenjpositivejandjnormativejanalysis?jWhichjofjthejf
ollowingjquestionsjwouldjentailjpositivejanalysis,jandjwhichjnormativejanalysis?
a) WhatjeffectjwilljInternetjauctionjcompaniesjhavejonjthejprofitsjofjlocaljautomobilejd
ealerships?
b) ShouldjthejgovernmentjimposejspecialjtaxesjonjsalesjofjmerchandisejmadejoverjthejI
nternet?
Positivejanalysisjattemptsjtojexplainjhowjanjeconomicjsystemjworksjorjtojpredictjhowjitjwilljchang
ejoverjtimejbyjaskingjexplanatoryjorjpredictivejquestions.j Normativejanalysisjfocusesjonjwhatjshou
ldjbejdonejbyjaskingjprescriptivejquestions.
Copyrightj©j2014jJohnjWileyj&jSons,jInc. Chapterj1j-j2
,Besankoj&jBraeutigamj–jMicroeconomics,j5thjedition SolutionsjManual
a) Becausejthisjquestionjasksjwhetherjdealershipjprofitsjwilljgojupjorjdownj(andjbyjho
wjmuch)j–jbutjrefrainsjfromjinquiringjasjtojwhetherjthisjwouldjbejajgoodjthingj–
jitjisjanjexamplejofjpositivejanalysis.
b) Onjthejotherjhand,jthisjquestionjasksjwhetherjitjisjdesirablejtojimposejtaxesjonjInt
ernetjsales,jsojitjisjnormativejanalysis.j Notably,jthisjquestionjdoesjnotjaskjwhatjt
hejeffectjofjsuchjtaxesjwouldjbe.
SolutionsjtojProblems
1.1 Discussjthejfollowingjstatement:j“Sincejsupplyjandjdemandjcurvesjarejalwaysjs
hifting,jmarketsjneverjactuallyjreachjanjequilibrium.jTherefore,jthejconceptjofjequili
briumjisjuseless.”
Whilejthejclaimjthatjmarketsjneverjreachjanjequilibriumjisjprobablyjdebatable,jevenjifjmarketsjdojn
otjeverjreachjequilibrium,jthejconceptjisjstilljofjcentraljimportance.j Thejconceptjofjequilibriumjisji
mportantjbecausejitjprovidesjajsimplejwayjtojpredictjhowjmarketjpricesjandjquantitiesjwilljchangeja
sjexogenousjvariablesjchange.j Thus,jwhilejwejmayjneverjreachjajparticularjequilibriumjprice,jsayjb
ecausejajsupplyjorjdemandjschedulejshiftsjasjthejmarketjmovesjtowardjequilibrium,jwejcanjpredictj
withjrelativejease,jforjexample,jwhetherjpricesjwilljbejrisingjorjfallingjwhenjexogenousjmarketjfact
orsjchangejasjwejmovejtowardjequilibrium.j Asjexogenousjvariablesjcontinuejtojchange,jwejcanjco
ntinuejtojpredictjthejdirectionjofjchangejforjthejendogenousjvariables,jandjthisjisjnotj“useless.”
1.2 Injanjarticlejentitled,j“CornjPricesjSurgejonjExportjDemand,jCropjData,”jThejWalljS
treetjJournaljidentifiedjseveraljexogenousjshocksjthatjpushedjU.S.jcornjpricesjsharplyjhigher
.(SeejthejarticlejbyjAaronjLucchetti,jAugustj22,j1997,jp.jC17.jonjnationaljincome.)jSupposejthejU.S.jmarketjf
orjcornjisjcompetitive,jwithjanjupward-slopingjsupplyjcurvejandjajdownward-
jslopingjdemandjcurve.jForjeachjofjthejfollowingjscenarios,jillustratejgraphicallyjhowjthejex
ogenousjeventjdescribedjwilljcontributejtojajhigherjpricejofjcornjinjthejU.S.jmarket.
a) ThejU.S.jDepartmentjofjAgriculturejannouncesjthatjexportsjofjcornjtojTaiwanjandjJ
apanjwerej“surprisinglyjbullish,”jaroundj30jpercentjhigherjthanjhadjbeenjexpected.
b) SomejanalystsjprojectjthatjthejsizejofjthejU.S.jcornjcropjwilljhitjajsix-
yearjlowjbecausejofjdryjweather.
c) ThejstrengtheningjofjEljNiño,jthejmeteorologicaljtrendjthatjbringsjwarmerjweatherjtojt
hejwesternjcoastjofjSouthjAmerica,jreducesjcornjproductionjoutsidejthejUnitedjStates,jthe
rebyjincreasingjforeignjcountries’jdependencejonjthejU.S.jcornjcrop.
Copyrightj©j2014jJohnjWileyj&jSons,jInc. Chapterj1j-j3
, Besankoj&jBraeutigamj–jMicroeconomics,j5thjedition SolutionsjManual
a) Surprisinglyjhighjexportjsalesjmeanjthatjthejdemandjforjcornjwasjhigherjthanjex
pected,jatjD2j ratherjthanjD1.
P
S
P2
j P
1
D2
D1
Q
b) Dryjweatherjwouldjreducejthejsupplyjofjcorn,jtojS2j ratherjthanjS1.
S2
P
S1
P2
P1
D
Q
c) AssumingjthejU.S.jdoesjnotjimportjcorn,jreducedjproductionjoutsidejthejU.S.jwou
ldjnotjimpactjU.S.jcornjmarketjsupply.j EljNinojwould,jhowever,jcausejdemandjfo
rjU.S.jcornjtojshiftjout,jthejfigurejbeingjthejsamejasjinjpartj(a)jabove.
1.3 Injearlyj2008,jthejpricejofjoiljonjthejworldjmarketjincreased,jhittingjajpeakjofjabout
$140jperjbarreljinjJuly,j2008.jInjthejsecondjhalfjofj2008,jthejpricejofjoiljdeclined,jendingjthejy
earjatjjustjoverj$40jperjbarrel.jSupposejthatjthejglobaljmarketjforjoiljcanjbejdescribedjbyjanj
upward-slopingjsupplyjcurvejandjajdownward-
slopingjdemandjcurve.jForjeachjofjthejfollowingjscenarios,jillustratejgraphicallyjhowjthejexo
genousjeventjcontributedjtojajrisejorjajdeclinejinjthejpricejofjoiljinj2008:
Copyrightj©j2014jJohnjWileyj&jSons,jInc. Chapterj1j-j4
Chapter 1 j
Analyzing Economic Problems
j j
SolutionsjtojReviewjQuestions
1. Whatjisjthejdifferencejbetweenjmicroeconomicsjandjmacroeconomics?
Microeconomicsjstudiesjthejeconomicjbehaviorjofjindividualjeconomicjdecisionjmakers,jsuchjasjajc
onsumer,jajworker,jajfirm,jorjajmanager.j Macroeconomicsjstudiesjhowjanjentirejnationaljeconomyj
performs,jexaminingjsuchjtopicsjasjthejaggregatejlevelsjofjincomejandjemployment,jthejlevelsjofjin
terestjratesjandjprices,jthejratejofjinflation,jandjthejnaturejofjbusinessjcycles.
2. Whyjisjeconomicsjoftenjdescribedjasjthejsciencejofjconstrainedjchoice?
Whilejourjwantsjforjgoodsjandjservicesjarejunlimited,jthejresourcesjnecessaryjtojproducejthosejgoo
dsjandjservices,jsuchjasjlabor,jmanagerialjtalent,jcapital,jandjrawjmaterials,jarej“scarce”jbecausejth
eirjsupplyjisjlimited.j Thisjscarcityjimpliesjthatjwejarejconstrainedjinjthejchoicesjwejcanjmakejaboutj
whichjgoodsjandjservicesjtojproduce.j Thus,jeconomicsjisjoftenjdescribedjasjthejsciencejofjconstrain
edjchoice.
3. Howjdoesjthejtooljofjconstrainedjoptimizationjhelpjdecisionjmakersjmakejchoices?j
Whatjrolesjdojthejobjectivejfunctionjandjconstraintsjplayjinjajmodeljofjconstrainedjoptimiz
ation?
Constrainedjoptimizationjallowsjthejdecisionjmakerjtojselectjthejbestj(optimal)jalternativejwhilejac
countingjforjanyjpossiblejlimitationsjorjrestrictionsjonjthejchoices.j Thejobjectivejfunctionjrepresen
tsjthejrelationshipjtojbejmaximizedjorjminimized.j Forjexample,jajfirm’sjprofitjmightjbejthejobjectiv
ejfunctionjandjalljchoicesjwilljbejevaluatedjinjthejprofitjfunctionjtojdeterminejwhichjyieldsjthejhighe
stjprofit.j Thejconstraintsjplacejlimitationsjonjthejchoicejthejdecisionjmakerjcanjselectjandjdefinesjth
ejsetjofjalternativesjfromjwhichjthejbestjwilljbejchosen.
4. Supposejthejmarketjforjwheatjisjcompetitive,jwithjanjupward-
slopingjsupplyjcurve,jajdownward-
slopingjdemandjcurve,jandjanjequilibriumjpricejofj$4.00jperjbushel.jWhyjwouldjajhigherjpr
icej(e.g.,j$5.00jperjbushel)jnotjbejanjequilibriumjprice?jWhyjwouldjajlowerjpricej(e.g.,j$2.50j
perjbushel)jnotjbejanjequilibriumjprice?
Ifjthejpricejinjthejmarketjwasjabovejthejequilibriumjprice,jconsumersjwouldjbejwillingjtojpurchasejf
ewerjunitsjthanjsuppliersjwouldjbejwillingjtojsell,jcreatingjanjexcessjsupply.j Asjsuppliersjrealizejth
eyjarejnotjsellingjthejunitsjtheyjhavejmadejavailable,jsellersjwilljbidjdownjthe
Copyrightj©j2014jJohnjWileyj&jSons,jInc. Chapterj1j-j1
,Besankoj&jBraeutigamj–jMicroeconomics,j5thjedition SolutionsjManual
pricejtojenticejmorejconsumersjtojpurchasejtheirjgoodsjorjservices.j Byjdefinition,jequilibriumjisjajst
atejthatjwilljremainjunchangedjasjlongjasjexogenousjfactorsjremainjunchanged.j Sincejinjthisjcasejs
uppliersjwilljlowerjtheirjprice,jthisjhighjpricejcannotjbejanjequilibrium.
Whenjthejpricejisjbelowjthejequilibriumjprice,jconsumersjwilljdemandjmorejunitsjthanjsuppliersjha
vejmadejavailable.j Thisjexcessjdemandjwilljenticejconsumersjtojbidjupjthejpricesjtojpurchasejthejli
mitedjunitsjavailable.j Sincejthejpricejwilljchange,jitjcannotjbejanjequilibrium.
5. Whatjisjthejdifferencejbetweenjanjexogenousjvariablejandjanjendogenousjvariableji
njanjeconomicjmodel?jWouldjitjeverjbejusefuljtojconstructjajmodeljthatjcontainedjonlyjexo
genousjvariablesj(andjnojendogenousjvariables)?
Exogenousjvariablesjarejtakenjasjgivenjinjanjeconomicjmodel,ji.e.,jtheyjarejdeterminedjbyjsomejpro
cessjoutsidejthejmodel,jwhilejendogenousjvariablesjarejdeterminedjwithinjthejeconomicjmodeljbein
gjstudied.
Anjeconomicjmodeljthatjcontainedjnojendogenousjvariablesjwouldjnotjbejveryjinteresting.j Withjnoj
endogenousjvariables,jnothingjwouldjbejdeterminedjbyjthejmodeljsojitjwouldjnotjservejmuchjpurpo
se.
6. Whyjdojeconomistsjdojcomparativejstaticsjanalysis?jWhatjrolejdojendogenousjv
ariablesjandjexogenousjvariablesjplayjinjcomparativejstaticsjanalysis?
Comparativejstaticsjanalysesjarejperformedjtojdeterminejhowjthejlevelsjofjendogenousjvariablesjch
angejasjsomejexogenousjvariablejisjchanged.j Thisjtypejofjanalysisjisjveryjimportantjsincejinjthejrea
ljworldjthejexogenousjvariables,jsuchjasjweather,jpolicyjtools,jetc.jarejalwaysjchangingjandjitjisjuse
fuljtojknowjhowjchangesjinjthesejvariablesjaffectjthejlevelsjofjother,jendogenous,jvariables.j Anjexa
mplejofjcomparativejstaticsjanalysisjwouldjbejaskingjthejquestion:jIfjextraordinarilyjlowjrainfallj(a
njexogenousjvariable)jcausesjaj30jpercentjreductionjinjcornjsupply,jbyjhowjmuchjwilljthejmarketjpri
cejforjcornj(anjendogenousjvariable)jincrease?
7. Whatjisjthejdifferencejbetweenjpositivejandjnormativejanalysis?jWhichjofjthejf
ollowingjquestionsjwouldjentailjpositivejanalysis,jandjwhichjnormativejanalysis?
a) WhatjeffectjwilljInternetjauctionjcompaniesjhavejonjthejprofitsjofjlocaljautomobilejd
ealerships?
b) ShouldjthejgovernmentjimposejspecialjtaxesjonjsalesjofjmerchandisejmadejoverjthejI
nternet?
Positivejanalysisjattemptsjtojexplainjhowjanjeconomicjsystemjworksjorjtojpredictjhowjitjwilljchang
ejoverjtimejbyjaskingjexplanatoryjorjpredictivejquestions.j Normativejanalysisjfocusesjonjwhatjshou
ldjbejdonejbyjaskingjprescriptivejquestions.
Copyrightj©j2014jJohnjWileyj&jSons,jInc. Chapterj1j-j2
,Besankoj&jBraeutigamj–jMicroeconomics,j5thjedition SolutionsjManual
a) Becausejthisjquestionjasksjwhetherjdealershipjprofitsjwilljgojupjorjdownj(andjbyjho
wjmuch)j–jbutjrefrainsjfromjinquiringjasjtojwhetherjthisjwouldjbejajgoodjthingj–
jitjisjanjexamplejofjpositivejanalysis.
b) Onjthejotherjhand,jthisjquestionjasksjwhetherjitjisjdesirablejtojimposejtaxesjonjInt
ernetjsales,jsojitjisjnormativejanalysis.j Notably,jthisjquestionjdoesjnotjaskjwhatjt
hejeffectjofjsuchjtaxesjwouldjbe.
SolutionsjtojProblems
1.1 Discussjthejfollowingjstatement:j“Sincejsupplyjandjdemandjcurvesjarejalwaysjs
hifting,jmarketsjneverjactuallyjreachjanjequilibrium.jTherefore,jthejconceptjofjequili
briumjisjuseless.”
Whilejthejclaimjthatjmarketsjneverjreachjanjequilibriumjisjprobablyjdebatable,jevenjifjmarketsjdojn
otjeverjreachjequilibrium,jthejconceptjisjstilljofjcentraljimportance.j Thejconceptjofjequilibriumjisji
mportantjbecausejitjprovidesjajsimplejwayjtojpredictjhowjmarketjpricesjandjquantitiesjwilljchangeja
sjexogenousjvariablesjchange.j Thus,jwhilejwejmayjneverjreachjajparticularjequilibriumjprice,jsayjb
ecausejajsupplyjorjdemandjschedulejshiftsjasjthejmarketjmovesjtowardjequilibrium,jwejcanjpredictj
withjrelativejease,jforjexample,jwhetherjpricesjwilljbejrisingjorjfallingjwhenjexogenousjmarketjfact
orsjchangejasjwejmovejtowardjequilibrium.j Asjexogenousjvariablesjcontinuejtojchange,jwejcanjco
ntinuejtojpredictjthejdirectionjofjchangejforjthejendogenousjvariables,jandjthisjisjnotj“useless.”
1.2 Injanjarticlejentitled,j“CornjPricesjSurgejonjExportjDemand,jCropjData,”jThejWalljS
treetjJournaljidentifiedjseveraljexogenousjshocksjthatjpushedjU.S.jcornjpricesjsharplyjhigher
.(SeejthejarticlejbyjAaronjLucchetti,jAugustj22,j1997,jp.jC17.jonjnationaljincome.)jSupposejthejU.S.jmarketjf
orjcornjisjcompetitive,jwithjanjupward-slopingjsupplyjcurvejandjajdownward-
jslopingjdemandjcurve.jForjeachjofjthejfollowingjscenarios,jillustratejgraphicallyjhowjthejex
ogenousjeventjdescribedjwilljcontributejtojajhigherjpricejofjcornjinjthejU.S.jmarket.
a) ThejU.S.jDepartmentjofjAgriculturejannouncesjthatjexportsjofjcornjtojTaiwanjandjJ
apanjwerej“surprisinglyjbullish,”jaroundj30jpercentjhigherjthanjhadjbeenjexpected.
b) SomejanalystsjprojectjthatjthejsizejofjthejU.S.jcornjcropjwilljhitjajsix-
yearjlowjbecausejofjdryjweather.
c) ThejstrengtheningjofjEljNiño,jthejmeteorologicaljtrendjthatjbringsjwarmerjweatherjtojt
hejwesternjcoastjofjSouthjAmerica,jreducesjcornjproductionjoutsidejthejUnitedjStates,jthe
rebyjincreasingjforeignjcountries’jdependencejonjthejU.S.jcornjcrop.
Copyrightj©j2014jJohnjWileyj&jSons,jInc. Chapterj1j-j3
, Besankoj&jBraeutigamj–jMicroeconomics,j5thjedition SolutionsjManual
a) Surprisinglyjhighjexportjsalesjmeanjthatjthejdemandjforjcornjwasjhigherjthanjex
pected,jatjD2j ratherjthanjD1.
P
S
P2
j P
1
D2
D1
Q
b) Dryjweatherjwouldjreducejthejsupplyjofjcorn,jtojS2j ratherjthanjS1.
S2
P
S1
P2
P1
D
Q
c) AssumingjthejU.S.jdoesjnotjimportjcorn,jreducedjproductionjoutsidejthejU.S.jwou
ldjnotjimpactjU.S.jcornjmarketjsupply.j EljNinojwould,jhowever,jcausejdemandjfo
rjU.S.jcornjtojshiftjout,jthejfigurejbeingjthejsamejasjinjpartj(a)jabove.
1.3 Injearlyj2008,jthejpricejofjoiljonjthejworldjmarketjincreased,jhittingjajpeakjofjabout
$140jperjbarreljinjJuly,j2008.jInjthejsecondjhalfjofj2008,jthejpricejofjoiljdeclined,jendingjthejy
earjatjjustjoverj$40jperjbarrel.jSupposejthatjthejglobaljmarketjforjoiljcanjbejdescribedjbyjanj
upward-slopingjsupplyjcurvejandjajdownward-
slopingjdemandjcurve.jForjeachjofjthejfollowingjscenarios,jillustratejgraphicallyjhowjthejexo
genousjeventjcontributedjtojajrisejorjajdeclinejinjthejpricejofjoiljinj2008:
Copyrightj©j2014jJohnjWileyj&jSons,jInc. Chapterj1j-j4
