1. Evaluate the followingevents on prices and volume ofsales of houses in the Northern Kentucky housing market.Use demand and supply diagrams, label them carefully, and explainwhat affects the diagram as a result of each event.
a. Delta Airlines, thelargest employer in the Northern Kentucky area, reduces the numberof flights by 50% and lays off 2,000 of its airport workers.
b. The federal government offers asignificant tax rebate to first-time home buyers, effectivelyincreasing each home buyer's after-tax income.
c. Duke Power raises therates for the consumption of natural gas and electricity by 20% forNorthern Kentucky, but not for Ohio.
d. The owners of apartment houseslower rents by 20% in response to the layoffs of airportworkers.
2. Given the demand function, QD = 100 - 2P, and the supply function, QS = - 60 + 3P, calculate:
a. The equilibrium price forthe good in question;
b. The quantity of the goodexchanged in equilibrium;
c. The amount of excessdemand when P = 25;
d. The amount of excess supplywhen P = 40.
3. Given the demand functionQD = 100 - 2P, calculate the price elasticity of demand:
a. at P =10;
b. at P = 25;
c. at P =30.
4. Given the demand functionQD = 100 - 2P, at what price while totalexpenditure of buyers be a maximum?