Q1. Chuck, Michael and Hakeem are three retired basketball players. They determine that in Huntington there is demand for private basketball coaching. The demand and supply curves for private basketball coaching are Qd = 50 - 0.5⋅ P and QS = P -10 respectively.
a. Find the equilibrium price and quantity
b. What is the price elasticity of demand at the equilibrium calculated in part (1)? Is demand for basketball coaching elastic or inelastic?
c. Calculate the price elasticity of demand on the segment (arc) of the demand curve between the prices of $20 and $40
d. What is the price elasticity of supply calculated at the equilibrium calculated in part (b)? Is the supply of basketball coaching elastic or inelastic?
Q2. Suppose that the supply of low-skilled labor is given by:
LS = 10w
where w is the wage (dollars per hour) and LS is the quantity of low-skilled labor (in millions of persons employed each year). The demand for low-skilled labor is given by:
LD = 80 - 10w
a. What will be the equilibrium wage rate and employment level? Graph the supply and demand curves and show the equilibrium.
Q2. Suppose that the supply of low-skilled labor is given by:
LS = 10w
where w is the wage (dollars per hour) and LS is the quantity of low-skilled labor (in millions of persons employed each year). The demand for low-skilled labor is given by:
LD = 80 - 10w
a. What will be the equilibrium wage rate and employment level? Graph the supply and demand curves and show the equilibrium.
b. What is the point elasticity of supply in equilibrium?
Now, suppose that the government sets a minimum wage of $5 per hour.
c. How many people will be employed at that wage? Show the ceiling and the new equilibrium on your graph (preferably in a different color).
d. How many people want to be employed at this wage?
e. What is the arc elasticity over the demand curve for the two points on the demand curve?
f. Will there be any dead-weight loss? If so, calculate the size of theQ3. California supplies the US with 80% of its eating oranges. In late 1998, four days of freezing temperatures in the state's Central Valley substantially damaged the crop. In early 1999, Food Lion, with 1.208 grocery stores mostly in the Southeast, said its prices for fresh oranges would rise by 20% to 30%, which was less than the 100% increase it had to pay for the oranges.
a. Explain why the price that consumers pay did not rise by the full amount of Food Lion's price increase.
b. What can you conclude about the elasticities of demand and supply for oranges?
Q4. Suppose that the demand function for apple cider is estimated to be Qd = 100 - P, where P is the price paid by consumers in cents per bottle and Qd is the quantity demanded in thousands of bottles per day. The supply curve for apple cider is estimated to be Qs = 1/4 * P
a. Calculate the equilibrium price and quantity.
b. Calculate the own (point) price elasticities of demand and supply at the equilibrium price and quantity.