Question 1:
A ) Every demand curve must eventually hit the quantity axis because with limited incomes there is always a price so high that there is no demand for the good.
B) If the elasticity of demand for long-distance calls is 1.5 and the price of long- distance calls falls by 20 percent as a result of increased competition from the telecommunications bill that passed two years ago, households on average will spend less in the total on long distance service.
C) In 2003, an econometrics class at Boston University estimated that the demand for lobsters in the United States was approximately a straight line intersecting the price axis at $87 per pound and intersecting the X - axis at 110 million pounds per year. The demand curve is very elastic.
Question 2: Illustrate the following with supply and/or demand curves:
A) a situation of excess labor supply ( unemployment) caused by a minimum wage law
B) the effect of a sharp increase in heating oil prices on the demand for insulation material