Problem 1.
Demand Schedule Supply Schedule
Price Quantity Demanded/Year Price Quantity Supplied/yr
$2.25 12 2.25 30
2 16 2 28
1.75 20 1.75 26
1.5 24 1.5 24
1.25 28 1.25 22
1 32 1 20
a) Plot the supply and demand curves and indicate the equilibrium price and quantity.
b) What effect would a decrease in the price of beef have on the equilibrium price and quantity of hamburgers, assuming all other things remained constant? Explain using a diagram
c) What effect would an increase in the price of pizza have on the equilibrium price and quantity of hamburgers, assuming again that all other things remain constant? Use a diagram to explain
Problem 2.
a. Graph these curves and show the equilibrium price and quantity.
Price Quantity Demanded/Yr Quantity Supplied/yr
$160 40 24
200 36 28
240 32 32
280 28 36
320 24 40
360 20 44
b. Now suppose that it becomes unfashionable to ride a bike, so that the quantity demanded at each price falls by 8 million bikes/yr. What is the new equilibrium rice and quantity? Show this solution graphically. Explain why the quantity falls by less than 8 million bikes/yr.
c. Suppose instead that several major bicycle producers go out business, thereby reducing the quantity supplied by 8 million bikes at every price. Find the new equilibrium price and quantity, and show it graphically. Explain again why quantity falls by less than 8 million
d. What are the equilibrium price and quantity if she shifts described in b) and c).
Problem 3.
Price Quantity Demanded/yr Quantity Supplied/yr
$40 4,200 200
50 2,200 600
60 1,200 1,200
70 700 2,000
80. 550 3,000
a. What is the market equilibrium price and quantity of textbooks?
b. To quell outrage over tuition increases, the college places a $50 limit on the price of textbooks. How many textbooks will be sold now?
c. While the price limit is still in effect, automated publishing increases the efficiency of textbook production. Show graphically the likely effect of this innovation on the market rice and quantity.