Download Week 02 Assignment 02

2016-2017 Course Name & Number: ECO101 Economics (I)
Week 02 Assignment 02
Chaps 4, 5 & 6 – Demand and Supply, Elasticities of Demand
and Supply &Efficiency and Fairness of Markets
Chaps 4 Demand and Supply
Questions
※ Checkpoint 4.1 Demand
1. The Internet was born in 1969. For the next 20 years, mainly scientists in
universities and research laboratories used it. But in the 1990s, the use of Internet
service increased dramatically and the price per hour of Internet service fell.
1a.
Are there any substitutes for Internet service? If so, provide an
example.
1b.
Are there any complements of Internet service? If so, provide an
2.
example.
1c.
What are the main developments that brought about the dramatic
increase in the quantity of Internet service during the 1990s?
1d.
Which developments that you identified in part (c) shifted the demand
curve for Internet service rightward?
1e.
Which developments that you identified in part (c) increased the
quantity demanded of Internet service?
Answer and explain your answer for each of the events listed below.
2a.
What happens to the demand curve for pumpkins in October?
2b.
What happens to the demand curve for Gatorade in summer?
2c.
2d.
2e.
2f.
What happens to the demand curve for gasoline if 20 percent of all
new cars are required to be electric powered?
What happens to the demand and the demand curve for beef if more
people decide to become vegans?
The price of a concert ticket increases. What is the effect on the
demand curve for concerts?
Because of concerns about terrorism, more firms want to buy metal
detectors. What happens to the demand for metal detectors?
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2016-2017 Course Name & Number: ECO101 Economics (I)
2g.
More people decide to have a pet cat. What is the effect of this
decision on the demand for cat food?
※ Checkpoint 4.2 Supply
3. In the market for SUVs, several events occur one at a time. Explain the influence
of each event on the quantity supplied of SUVs and the supply of SUVs. Illustrate the
effects of each event by either a movement along the supply curve or a shift in the
supply curve and say which event or events illustrates the law of supply in action. The
events are:
3a. The price of a truck rises.
3b. The price of an SUV falls.
3c.
3d.
4.
The price of an SUV is expected to fall next year.
An SUV engine defect requires a huge and costly manufacturer's recall
to replace the defective engines.
3e. A new robot technology lowers the cost of producing SUVs.
Answer and explain your answer for each of the events listed below.
4a. What happens to the supply curve of new homes if the wage rate paid
to carpenters falls?
4b. Companies can produce both cardigan sweaters and pullover sweaters.
What happens to the supply curve of cardigan sweaters if the price of a
pullover sweater increases?
※ Checkpoint 4.3 Market Equilibrium
5. Suppose a technological advance lowers the cost of producing computer memory
chips. What is the effect of this change on the demand for memory chips, the
supply of memory chips, the equilibrium price of memory chips, and the
equilibrium quantity of memory chips?
Chaps 5 Elasticities of Demand and Supply
※ Checkpoint 5.1: The Price Elasticity of Demand
1. The price of spring water rises from $1.90 to $2.10 a bottle, and the quantity
demanded decreases from 11 million to 9 million bottles a week.
1a. Calculate the percentage change in the price of spring water.
1b. Calculate the percentage change in the quantity demanded of spring water.
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2016-2017 Course Name & Number: ECO101 Economics (I)
※ Checkpoint 5.2: The Price Elasticity of Supply
5. The price of U.S.-produced long grain rice fell by 40 percent from January
1999 to January 2000. In response to the price fall, growers of U.S. long grain
rice planted 17 percent less acreage in 2000. If the harvest also decreases by 17
percent:
5a. How would you describe the supply of U.S. long grain rice?
5b. How do you think production possibilities and storage possibilities influence
the price elasticity of supply of long grain rice?
5c. Calculate the price elasticity of supply of U.S.-produced long grain rice.
※ Checkpoint 5.3: Cross Elasticity and Income Elasticity
8. Suppose that when the price of a burger decreases from $2.00 to $1.75 and
other things remain the same, the quantity demanded of burgers increases from
200 an hour to 400 an hour and the quantity demanded of pizza decreases from
400 an hour to 200 an hour. At the same time, the quantity demanded of soda
increases from 150 an hour to 300 an hour.
8a. Calculate the cross elasticity of demand for soda with respect to burgers.
8b. Are soda and burgers substitutes or complements? Why?
8c. Calculate the cross elasticity of demand for pizza with respect to burgers.
Chaps 6 Efficiency and Fairness of Markets
※ Checkpoint 6.2 Value, Price, and Consumer Surplus
1.
Figure 6.1 shows the demand for soft
drinks. Use the figure to answer the
following questions:
1a. What is the value of the 30th can of
soft drink?
1b. What is the willingness to pay for
the 10th can of soft drink?
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2016-2017 Course Name & Number: ECO101 Economics (I)
※ Checkpoint 6.3 Cost, Price, and Producer Surplus
2.
Figure 6.2 shows the supply of soft drinks. Use the figure to answer
the following questions:
2a. What is the marginal cost of the 30th
can of soft drink?
2b. What is the minimum supply price of the
10th can of soft drink?
※ Checkpoint 6.4 Are Markets Efficient?
3.
Figure 6.3 shows the market for soft
drinks. Use the figure to answer the
following questions:
3a. What are the equilibrium price and
equilibrium quantity of soft drinks?
3b. In market equilibrium, what is the
consumer surplus?
3c. In market equilibrium, what is the
producer surplus?
※ Checkpoint 6.5 Are Markets Fair?
6. A drought has drastically reduced the water available in a desert
town. The only store decides to sell the bottled water it has at the
highest price that people are willing to pay.
6a. Who gets to consume the water?
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2016-2017 Course Name & Number: ECO101 Economics (I)
6b. Who receives the consumer surplus on water?
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