Name: Im Akrunkonghong Prof.

Ky Sereyvath
Group: A
ID: JD18-0635

Homework 2

1. Explain the distinction between the horizontal and vertical interpretation of the demand
curve.

 The distinction between the horizontal and vertical interpretations of the demand
curve:
- Horizontal interpretation is a way in which the demand curve is used to
determine how much of an amount of any good that consumers wish to buy at
different prices.
- Vertical interpretation is a way in which the demand curve is used to
determine the marginal buyer’s reservation price at any given quantity.

2. Knowing the production cost of a good is not sufficient to predict its market price
because in economics, the price of a good is determined by how much of its kind is being
supplied and how much it is being demanded and is sold at a price that satisfies both the
suppliers and the buyers. In this context you can have a type of good that costs a lot to
make and is ready to be supplied to the market, but there is no information about how
many of it is being demanded and thus its market price is undetermined.

3. In recent years, a government official proposed that gasoline price controls be imposed to
protect the poor from rising gasoline prices.
This proposal was most likely not enacted. The likely reason that led to this proposal is
that in the gasoline market, the market equilibrium is at a higher price point that the poor
could not afford them, but the price still satisfied the gas suppliers and those who can
afford it. By imposing a price ceiling or control on gasoline below the market
equilibrium, the gasoline market would be left with shortage of gasoline or supply
because the suppliers would be only willing to supply a lower amount of gas and thus still
Name: Im Akrunkonghong Prof. Ky Sereyvath
Group: A
ID: JD18-0635
leaving a lot of people without gasoline. The action would also come with an economic
loss or “deadweight”. 

4. The difference: 
1. “Change in demand” refers to the shift of the demand curve due to changes in
various factors such as income, wealth, price expectation, number of buyers
2. “Change in quantity demanded” refers to the change in quantity that people wish
to buy in response to a change in price.

5. Not getting attracted by the drop of price in gasoline because gas gasoline comes with a
cost of pollution and choosing not to use more gasoline is beneficial even though there
are no physical incentives for the suppliers or consumers to cease selling and buying.
Solutions to problems.

8. A. Equilibrium will be at a higher price with a surge of demand in oranges although the
quantity available will stay the same for a while.
B. Equilibrium will be at a lower price with the same amount of oranges supplied. 
C. Equilibrium will be at a lower price with more oranges available.
D. Equilibrium will be at a lower price with more oranges available.

9. Equilibrium will be at a lower price with more chickens sold.