1) Draw a supply-demand diagram of the market for rental apartments...

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1) Draw a supply-demand diagram of the market for rental apartments in Lowell in the neighborhoods surrounding the university. Illustrate the effect on monthly rents of a sharp decrease in state support of public higher education, combined with large increases in tuition and curriculum fees (assume that room and board fees in the dorms remain unchanged). Explain your diagram.

3)Several years ago an auto industry analyst reported: "Expect big discounts in the U.S. from the auto industry in the coming months as the recession in the Far East continues to dampen demand there. In recent years, investments in new technology have lowered production costs, so firms have room to lower prices auto industry analysts said." Is the above quote referring to a shift in supply conditions or demand conditions in the U.S. auto market? Draw a supply-demand diagram to illustrate.

4) Suppose that war broke out in the Middle East and oil pipelines to the Persian Gulf from the warring states were destroyed. What would you expect to happen to the price of natural gas? Explain your answer and illustrate it with appropriate supply-demand diagrams.

5) Suppose the government decided to tax gasoline in order to discourage its use because of its negative environmental impacts. Draw a supply-demand diagram to illustrate the effect of imposing a $1.50 per gallon tax on gasoline. Would the price of gasoline rise by more than, less than, or exactly $1.50?

6) Draw a supply-demand diagram to illustrate the effect on the market for Mexican salsa of a sharp decline in the price of tortilla chips. Explain your reasoning.

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Question 1:
When there is a decline in the state support of public higher education, the prices of higher education would increase which would result in a decrease in the demand for rental apartments in the neighboring areas in Lowell (as higher education and the demand for rental apartments around the university are complements for each other). This would shift the demand leftward from DD to DD2 as the number of the student enrolling for higher education and searching for rental accommodation would go down. This decrease in demand would get further intensified when the tuition and curriculum fees goes up which would result in decline in enrollment for higher education. This would result in a further leftward shift in the demand for rental apartments in the neighboring areas of Lowell. This results in decrease in the rent of rental apartments from P1 to P3 and also the number of rental apartments would also decline from Q1 to Q3....

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