Final answer:
This response covers how price, technological changes, product longevity, and natural disasters affect market equilibrium and price elasticity for gasoline and paint. Additionally, it addresses the concept of ceteris paribus, revenue impacts, shifts in demand and supply, and tax incidence.
Step-by-step explanation:
The questions provided pertain to market equilibrium, supply and demand, and the price elasticity of gasoline and paint. To answer the self-check questions, one must analyze the effects of price changes on the quantities demanded and supplied and understand the assumption of ceteris paribus in economic models. Furthermore, we must evaluate how technological advancements, product longevity, natural disasters, and factory shutdowns affect market conditions for paint.
1. At a price of $1.60 per gallon for gasoline, the quantity demanded would be lower compared to the equilibrium price of $1.40 per gallon. Conversely, the quantity supplied would be higher at $1.60. This situation creates a surplus in the market, where the quantity supplied exceeds the quantity demanded by a specific amount at this non-equilibrium price.
2. Economists use the ceteris paribus assumption to isolate the effects of one variable when analyzing the relationship between two variables in an economic model. This simplification allows for clarity in examining causation without the complications of other influencing factors.
3. Changes in the market for paint:
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- a. Cost-saving inventions in paint technology would increase the supply of paint.
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- b. If paint lasts longer, there would be a decrease in demand as property owners do not need to repaint as often.
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- c. Severe hailstorms increase the current demand for paint due to the necessity to repaint.
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- d. Damaged factories lead to a decrease in paint supply due to the forced closure.
In terms of price elasticities, they crucially impact revenue as a more inelastic demand or supply curve means less responsiveness to price changes, affecting sales volume, and thus, revenue. Elasticity causes shifts in demand and supply when prices or other determinants change. Long-term and short-term impacts of elasticity on equilibrium consider factors such as availability of substitutes and time for adjustment. Finally, the incidence of a tax depends on the relative elasticity of demand and supply; the more inelastic side bears a greater burden of the tax.