,Solution manual for Intermediate Microeconomics
and Its Application, 13th Edition Walter Nicholson
Notes
1- The file is chapter after chapter.
2- We have shown you 10 or five pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many new
editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
Chapter 1: Two Basic Economic Models
Purpose and Organization of the Chapter
This chapter provides an introduction to the book by showing why economists use simplified
models. The chapter begins with a few definitions of economics and then turns to a discussion
of such models. Development of Marshall's analysis of supply and demand is the main example
used here, and this provides a review for students of what they learned in introductory
economics. The notion of how shifts in supply or demand curves affect equilibrium prices is
highlighted. The chapter also reminds students of the production possibility frontier concept
and shows how it illustrates opportunity costs. The chapter concludes with a discussion of how
economic models might be verified. A brief description of the distinction between positive and
normative analysis is also presented.
Lecture and Discussion Suggestions
We have found that a useful way to start the course is with one (or perhaps two) lectures on the
historical development of microeconomics together with some current examples. For example,
many students find economic applications to the natural world fascinating and some of the
economics behind Application 1.1, might be examined. Application 1.6: Economic Confusion
provides normative distinction and to tell a few economic jokes (if your supply of such jokes is
running low – see Additional Resources). In terms of explicit content, some time should be
spent on reminding students about how supply and demand curves work since these concepts
underlie most of microeconomics. Especially important is to make sure that students
understand that these curves show firms’ and consumers’ reactions to all possible prices. That
is, the independent variable is on the vertical axis. Far more on the problems raised by this
approach is provided in Chapter 2.
Cengage Supplements
The following product-level supplements provide additional information that may help you in
preparing your course. They are available in the Instructor Resource Center.
• Test Bank
• PowerPoint slides
Chapter Objectives
The following objectives are addressed in this chapter:
01.01 Develop and analyze two basic economic models:
▪ The Production Possibility Frontier (PPF)
▪ The Supply-Demand Model
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
01.02 Explain how to use the PPF to break down six basic economic principles.
01.03 Understand how you can apply microeconomics to analyze all types of problems.
01.04 Explain how the interaction of buyers and sellers determines a good’s price.
01.05 Explain different ways in which economists verify theoretical models.
[return to top]
What's New in This Chapter
The following elements are improvements in this chapter from the previous edition:
• Chapter 1 is now a standalone chapter. The mathematical material from what was
previously an appendix to the chapter, now forms the basis for Chapter 2.
• An extended Application 1.3 examines video streaming and cord-cutting, suggesting the
importance of dynamism in the economy.
• A new Application 1.4 shows how a simple supply and demand model can explain
pricing of eggs during the COVID-19 lockdowns.
• A revised set of Review Questions focus more explicitly on the basic two models
introduced in the chapter.
[return to top]
Additional Resources
The most accessible introduction to the history of economics remains Robert Heilbroner’s The
Worldly Philosophers (Seventh Edition) Touchstone, 1999.
This one-minute video does a nice job of introducing most elements of supply and demand
analysis in a cartoon format: https://www.youtube.com/watch?v=720uyg0Dd_M
There are many websites featuring economic jokes. A good one is
https://upjoke.com/economist-jokes.
[return to top]
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
Solutions to End of Chapter Problems
Chapter 1 has no end of chapter problems. Problems involving both the production possibility
frontier and simple supply and demand curves can be found at the end of Chapter 2.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
Chapter 2: Some Useful Math
Purpose and Organization of the Chapter
Chapter 2 is new to this edition. It draws together the material that was previously in the
appendix to chapter 1 and adds a considerable amount of new material to fill out a complete
chapter. Many of the concepts here are drawn from a course in algebra. These include
concepts of the slope and intercept of a linear graph and some details on the solving of
simultaneous equations. Topics that are specifically oriented toward the use of algebra in
microeconomics include the importance of defining units for specific economic relationships
and how functions with two independent variables can be represented by their contour lines.
The chapter concludes with a very brief introduction to some of the statistical problems
encountered in estimating microeconomic models using real world data.
Lecture and Discussion Suggestions
Lecturing on this material is a good way to turn off most students. Hence, we believe the
chapter should be used primarily as a reference, urging students with poorer math preparation
to use it as needed. It is likely, however, that all students could benefit from a reminder about
how units of measurement affect linear equations and some of the material on contour lines
(since these will be encountered in the next chapter.
Whether mathematics should play a prominent role in microeconomics is a good topic for
discussion. As shown by this text (and by our more advanced one) we are firmly in the camp of
stressing the value of mathematics to the subject. But there are a variety of contrary views that
might be brought up. Whether economics should be viewed as a “science” or as philosophy is a
good place to start. Two videos on the topic are listed below.
Cengage Supplements
The following product-level supplements provide additional information that may help you in
preparing your course. They are available in the Instructor Resource Center.
• Test Bank
• PowerPoint Slides
Chapter Objectives
The following objectives are addressed in this chapter:
02.01 Write and graph an equation of a function of one variable.
02.02 Write and graph an equation of a function of two or more variables.
02.03 Solve systems of simultaneous equations.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
02.04 Understand the basics of testing economic models with real world data.
[return to top]
What's New in This Chapter
The most important new material in this chapter includes the following.
• An extended discussion of “Marshall’s Trap” mitigates the confusion caused by Alfred
Marshall’s decision to put an independent variable (price) on the vertical axis in graphs.
• An update of the text’s simple model of the world oil market incorporates the effects of
COVID-19 (Application 2.3). Somewhat surprisingly, the model continues to perform
fairly well.
• A new Application 2.4 introduces the “identification problem” as it relates to using actual
data to derive supply and demand curves. The proposed solution of Working in 1927
remains the key insight.
• An entire series of new review questions stresses a variety of algebraic topics.
[return to top]
Additional Resources
Videos from Kahn Academy provide extensive review material on all topics related to algebra
and the representation of functions with graphs. Students with poor math preparation should be
directed to this excellent source.
The Foundation for Economic Education has a nice essay on the possible overuse of
mathematics in economics : https://fee.org/articles/the-overuse-of-mathematics-in-
economics/.
Several years ago, Dani Rodrik’s website had a very nice discussion of why math is important to
economics: https://rodrik.typepad.com/dani_rodriks_weblog/2007/09/why-we-use-
math.html.
[return to top]
Solutions to End of Chapter Problems
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
Students have access to solutions for the odd-numbered problems as well as video problem
walkthroughs for problems 3 and 7.
2.1 a.
b. Yes, the points seem to be on straight lines. For the demand curve: P = 1
Q = –100
Q
P=a−
100
at P = 1, Q = 700, so a = 8 and
Q
P =8− or Q = 800 − 100 P
100
For the supply curve, the points also seem to be on a straight line:
P 1
=
Q 200
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
Q
If P = a + bQ = a +
200
at P = 2, Q = 300, 2 = – a + 1.5, or a = 0.5.
Q
Hence the equation is P = 0.5 + or Q = 200P − 100
200
c,d For supply Q = 200P – 100
If P = 0, Q = –100 = 0 (since negative supply is impossible).
If P = 6, Q = 1100.
For demand Q=800 ‒ 100P
When P = 0, Q = 800.
When P = 6, Q = 200.
Excess Demand at P = 0 is 800.
Excess supply at P = 6 is 1,100 – 200 = 900.
2.2 a. Supply: Q = 200P – 100
Demand: Q = –100P + 800
Supply = Demand: 200P – 100 = –100P + 800
300P = 900 or P = 3
When P = 3, Q = 500.
b. At P = 2, Demand = 600 and Supply = 300.
At P = 4, Demand = 400 and Supply = 700.
c.
d. New demand is Q = –100P + 1100.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 4
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
e. Supply = Demand: 200P – 100 = –100P + 1100.
300 P = 1200
P = 4, Q = 700.
f. Supply is now Q = 200P – 400.
g. Supply = Demand when QS = QD
200P – 400 = –100P + 800
300P = 1200
P = 4, Q = 400
h. At P = 3, QS = 200, QD = 500 ; this is not an equilibrium price. Participants would
know this is not an equilibrium price because there would be a shortage of orange
juice.
i.
2.3 a. Excess Demand is the following at the various prices
P = 1 ED = 700 − 100 = 600
P = 2 ED = 600 − 300 = 300
P = 3 ED = 500 − 500 = 0
P = 4 ED = 400 − 700 = −300
P = 5 ED = 300 − 900 = −600
The auctioneer found the equilibrium price where ED = 0.
b. Here is the information the auctioneer gathers from calling quantities:
Q = 300 PS = 2 PD = 5
Q = 500 PS = 3 PD = 3
Q = 700 PS = 4 PD = 1
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 5
website, in whole or in part.
and Its Application, 13th Edition Walter Nicholson
Notes
1- The file is chapter after chapter.
2- We have shown you 10 or five pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many new
editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
Chapter 1: Two Basic Economic Models
Purpose and Organization of the Chapter
This chapter provides an introduction to the book by showing why economists use simplified
models. The chapter begins with a few definitions of economics and then turns to a discussion
of such models. Development of Marshall's analysis of supply and demand is the main example
used here, and this provides a review for students of what they learned in introductory
economics. The notion of how shifts in supply or demand curves affect equilibrium prices is
highlighted. The chapter also reminds students of the production possibility frontier concept
and shows how it illustrates opportunity costs. The chapter concludes with a discussion of how
economic models might be verified. A brief description of the distinction between positive and
normative analysis is also presented.
Lecture and Discussion Suggestions
We have found that a useful way to start the course is with one (or perhaps two) lectures on the
historical development of microeconomics together with some current examples. For example,
many students find economic applications to the natural world fascinating and some of the
economics behind Application 1.1, might be examined. Application 1.6: Economic Confusion
provides normative distinction and to tell a few economic jokes (if your supply of such jokes is
running low – see Additional Resources). In terms of explicit content, some time should be
spent on reminding students about how supply and demand curves work since these concepts
underlie most of microeconomics. Especially important is to make sure that students
understand that these curves show firms’ and consumers’ reactions to all possible prices. That
is, the independent variable is on the vertical axis. Far more on the problems raised by this
approach is provided in Chapter 2.
Cengage Supplements
The following product-level supplements provide additional information that may help you in
preparing your course. They are available in the Instructor Resource Center.
• Test Bank
• PowerPoint slides
Chapter Objectives
The following objectives are addressed in this chapter:
01.01 Develop and analyze two basic economic models:
▪ The Production Possibility Frontier (PPF)
▪ The Supply-Demand Model
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
01.02 Explain how to use the PPF to break down six basic economic principles.
01.03 Understand how you can apply microeconomics to analyze all types of problems.
01.04 Explain how the interaction of buyers and sellers determines a good’s price.
01.05 Explain different ways in which economists verify theoretical models.
[return to top]
What's New in This Chapter
The following elements are improvements in this chapter from the previous edition:
• Chapter 1 is now a standalone chapter. The mathematical material from what was
previously an appendix to the chapter, now forms the basis for Chapter 2.
• An extended Application 1.3 examines video streaming and cord-cutting, suggesting the
importance of dynamism in the economy.
• A new Application 1.4 shows how a simple supply and demand model can explain
pricing of eggs during the COVID-19 lockdowns.
• A revised set of Review Questions focus more explicitly on the basic two models
introduced in the chapter.
[return to top]
Additional Resources
The most accessible introduction to the history of economics remains Robert Heilbroner’s The
Worldly Philosophers (Seventh Edition) Touchstone, 1999.
This one-minute video does a nice job of introducing most elements of supply and demand
analysis in a cartoon format: https://www.youtube.com/watch?v=720uyg0Dd_M
There are many websites featuring economic jokes. A good one is
https://upjoke.com/economist-jokes.
[return to top]
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
Solutions to End of Chapter Problems
Chapter 1 has no end of chapter problems. Problems involving both the production possibility
frontier and simple supply and demand curves can be found at the end of Chapter 2.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
Chapter 2: Some Useful Math
Purpose and Organization of the Chapter
Chapter 2 is new to this edition. It draws together the material that was previously in the
appendix to chapter 1 and adds a considerable amount of new material to fill out a complete
chapter. Many of the concepts here are drawn from a course in algebra. These include
concepts of the slope and intercept of a linear graph and some details on the solving of
simultaneous equations. Topics that are specifically oriented toward the use of algebra in
microeconomics include the importance of defining units for specific economic relationships
and how functions with two independent variables can be represented by their contour lines.
The chapter concludes with a very brief introduction to some of the statistical problems
encountered in estimating microeconomic models using real world data.
Lecture and Discussion Suggestions
Lecturing on this material is a good way to turn off most students. Hence, we believe the
chapter should be used primarily as a reference, urging students with poorer math preparation
to use it as needed. It is likely, however, that all students could benefit from a reminder about
how units of measurement affect linear equations and some of the material on contour lines
(since these will be encountered in the next chapter.
Whether mathematics should play a prominent role in microeconomics is a good topic for
discussion. As shown by this text (and by our more advanced one) we are firmly in the camp of
stressing the value of mathematics to the subject. But there are a variety of contrary views that
might be brought up. Whether economics should be viewed as a “science” or as philosophy is a
good place to start. Two videos on the topic are listed below.
Cengage Supplements
The following product-level supplements provide additional information that may help you in
preparing your course. They are available in the Instructor Resource Center.
• Test Bank
• PowerPoint Slides
Chapter Objectives
The following objectives are addressed in this chapter:
02.01 Write and graph an equation of a function of one variable.
02.02 Write and graph an equation of a function of two or more variables.
02.03 Solve systems of simultaneous equations.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
02.04 Understand the basics of testing economic models with real world data.
[return to top]
What's New in This Chapter
The most important new material in this chapter includes the following.
• An extended discussion of “Marshall’s Trap” mitigates the confusion caused by Alfred
Marshall’s decision to put an independent variable (price) on the vertical axis in graphs.
• An update of the text’s simple model of the world oil market incorporates the effects of
COVID-19 (Application 2.3). Somewhat surprisingly, the model continues to perform
fairly well.
• A new Application 2.4 introduces the “identification problem” as it relates to using actual
data to derive supply and demand curves. The proposed solution of Working in 1927
remains the key insight.
• An entire series of new review questions stresses a variety of algebraic topics.
[return to top]
Additional Resources
Videos from Kahn Academy provide extensive review material on all topics related to algebra
and the representation of functions with graphs. Students with poor math preparation should be
directed to this excellent source.
The Foundation for Economic Education has a nice essay on the possible overuse of
mathematics in economics : https://fee.org/articles/the-overuse-of-mathematics-in-
economics/.
Several years ago, Dani Rodrik’s website had a very nice discussion of why math is important to
economics: https://rodrik.typepad.com/dani_rodriks_weblog/2007/09/why-we-use-
math.html.
[return to top]
Solutions to End of Chapter Problems
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
Students have access to solutions for the odd-numbered problems as well as video problem
walkthroughs for problems 3 and 7.
2.1 a.
b. Yes, the points seem to be on straight lines. For the demand curve: P = 1
Q = –100
Q
P=a−
100
at P = 1, Q = 700, so a = 8 and
Q
P =8− or Q = 800 − 100 P
100
For the supply curve, the points also seem to be on a straight line:
P 1
=
Q 200
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
Q
If P = a + bQ = a +
200
at P = 2, Q = 300, 2 = – a + 1.5, or a = 0.5.
Q
Hence the equation is P = 0.5 + or Q = 200P − 100
200
c,d For supply Q = 200P – 100
If P = 0, Q = –100 = 0 (since negative supply is impossible).
If P = 6, Q = 1100.
For demand Q=800 ‒ 100P
When P = 0, Q = 800.
When P = 6, Q = 200.
Excess Demand at P = 0 is 800.
Excess supply at P = 6 is 1,100 – 200 = 900.
2.2 a. Supply: Q = 200P – 100
Demand: Q = –100P + 800
Supply = Demand: 200P – 100 = –100P + 800
300P = 900 or P = 3
When P = 3, Q = 500.
b. At P = 2, Demand = 600 and Supply = 300.
At P = 4, Demand = 400 and Supply = 700.
c.
d. New demand is Q = –100P + 1100.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 4
website, in whole or in part.
, Instructor Manual: Nicholson/Snyder, Intermediate Microeconomics, 13e
e. Supply = Demand: 200P – 100 = –100P + 1100.
300 P = 1200
P = 4, Q = 700.
f. Supply is now Q = 200P – 400.
g. Supply = Demand when QS = QD
200P – 400 = –100P + 800
300P = 1200
P = 4, Q = 400
h. At P = 3, QS = 200, QD = 500 ; this is not an equilibrium price. Participants would
know this is not an equilibrium price because there would be a shortage of orange
juice.
i.
2.3 a. Excess Demand is the following at the various prices
P = 1 ED = 700 − 100 = 600
P = 2 ED = 600 − 300 = 300
P = 3 ED = 500 − 500 = 0
P = 4 ED = 400 − 700 = −300
P = 5 ED = 300 − 900 = −600
The auctioneer found the equilibrium price where ED = 0.
b. Here is the information the auctioneer gathers from calling quantities:
Q = 300 PS = 2 PD = 5
Q = 500 PS = 3 PD = 3
Q = 700 PS = 4 PD = 1
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 5
website, in whole or in part.
