For each event, illustrate the impact on the relevant market and determine what will happen to the equilibrium price and quantity in that market. (40 points – 10 points per line item)

Event
Market for:
Show which curve shifts
Equilibrium price rise or fall?
Equilibrium quantity increase or decrease?

Economic growth is expected to improve in the next two quarters.
Aluminum




Plastics production capacity has increased.
Plastics




The Japanese government has decided to subsidize its domestic automobile producers with stimulus money.
Automobiles




Manufacturers who use plastic as an input have access to cheaper plastic.
Manufactured goods that use plastic as an input

To determine the impact of each event on the relevant market, we need to analyze the changes in supply and demand and how they affect the equilibrium price and quantity.

1. Economic growth is expected to improve in the next two quarters (Aluminum market):
- The increase in economic growth indicates higher demand for goods and services, which may lead to an increased demand for aluminum.
- The demand curve for aluminum shifts to the right, indicating an increase in demand.
- As a result, the equilibrium price in the aluminum market is likely to rise.
- The equilibrium quantity of aluminum may also increase due to the increased demand.

2. Plastics production capacity has increased (Plastics market):
- An increase in production capacity means that there will be more supply of plastics available in the market.
- The supply curve for plastics shifts to the right, indicating an increase in supply.
- With the increased supply, the equilibrium price in the plastics market is likely to fall.
- The equilibrium quantity of plastics may also increase due to the increased supply.

3. The Japanese government has decided to subsidize its domestic automobile producers with stimulus money (Automobiles market):
- The government subsidy to domestic automobile producers reduces their costs, which may lead to a decrease in the price of automobiles.
- The supply curve for automobiles shifts to the right, indicating an increase in supply.
- As a result, the equilibrium price in the automobiles market is likely to fall.
- The equilibrium quantity of automobiles may increase due to the lower price and increased supply.

4. Manufacturers who use plastic as an input have access to cheaper plastic (Manufactured goods that use plastic as an input market):
- The decrease in the price of plastic used as an input reduces the production costs for manufacturers.
- This cost reduction may lead to a decrease in the price of manufactured goods that use plastic as an input.
- The supply curve for manufactured goods that use plastic as an input shifts to the right, indicating an increase in supply.
- As a result, the equilibrium price in the market for manufactured goods using plastic as an input is likely to fall.
- The equilibrium quantity of these goods may increase due to the lower price and increased supply.

Remember, these are general trends based on the shifts in supply and demand curves. The actual impact on equilibrium price and quantity may vary depending on the specific market conditions.