Part 1:
Bert, as a consumer, places the value on a pair of jeans as follows:
Value of first pair: $70
Value of second pair: $60
Value of third pair: $50
Value of fourth pair: $40
Value of fifth pair: $30
Value of sixth pair: $20
Value of seventh pair: $10
Ernie, as a producer, pays the following cost to produce jeans.
Cost of first pair: $10
Cost of second pair: $20
Cost of third pair: $30
Cost of fourth pair: $40
Cost of fifth pair: $50
Cost of sixth pair: $60
Cost of seventh pair: $70
Using the information given above, answer the following questions.
1. If the price is $20, how many pairs of jeans will be demanded by Bert?
2. If the price is $20, how many pairs of jeans will be supplied by Ernie?
3. Explain the reason why $30 price is not an equilibrium price.
4. What is behind the force that moves the price from $30 to the equilibrium level?
Part 2:
If the price of milk rises, what will happen to the demand for gasoline? Provide an explanation for a possible link between the price of milk and the demand for gasoline.
Part 3:
Bert, as a consumer, places the value on a pair of jeans as follows.
Value of first pair: $70
Value of second pair: $60
Value of third pair: $50
Value of fourth pair: $40
Value of fifth pair: $30
Value of sixth pair: $20
Value of seventh pair: $10
Ernie, as a producer, pays the following cost to produce jeans.
Cost of first pair: $10
Cost of second pair: $20
Cost of third pair: $30
Cost of fourth pair: $40
Cost of fifth pair: $50
Cost of sixth pair: $60
Cost of seventh pair: $70
Using the information given above, answer the following questions.
1. If five pairs of jeans were ordered, what price will Ernie charge per pair? What kind of function is being used to answer the question?
2. If five pairs of jeans are available to buy, what price is Bert willing to pay per pair? What kind of function is being used to answer the question?
3. If the price is $40, what is the size of the consumer surplus?
4. If the price is $40, what is the size of the producer surplus?