The demand and supply schedules for gum are given in the table. a.Draw a graph of the gum market, label the axes and the curves, and mark in the equilibrium price and quantity. b.Suppose that the price of gum is 70¢ a pack. Describe the situation in the gum market and explain how the price adjusts.
c.Suppose that the price of gum is 30¢ a pack. Describe the situation in the gum market and explain how the price adjusts. d.A fire destroys some factories that produce gum and the quantity of gum supplied decreases by 40 million packs a week at each price. Explain what happens in the market for gum and illustrate the changes on your graph.
e.If at the time the fire occurs in d, there is an increase in the teenage population, which increases the quantity of gum demanded by 40 million packs a week at each price. What are the new equilibrium price and quantity of gum? Illustrate these changes in your graph.
Price| Quantity demanded| Quantity
(cents per pack)| (millions of packs a week)|
20| 180| 60|
40| 140| 100|
60| 100| 140|
80| 60| 180|
100| 20| 220|
2.William Gregg owned a mill in South Carolina. In December 1862, he placed a notice in the Edgehill Advertiser announcing his willingness to exchange cloth for food and other items. Here is an extract:
1 yard of cloth for 1 pound of bacon
2 yards of cloth for 1 pound of butter
4 yards of cloth for 1 pound of wool
8 yards of cloth for 1 bushel of salt
a.What is the relative price of butter in terms of wool?
b.If the money price of bacon was 20¢ a pound, what do you predict was the money price of butter? c.If the money price of bacon was 20¢ a pound and the money price of salt was $2.00 a bushel, do you think anyone would accept Mr. Gregg’s offer of cloth for salt?
3.Figure 3.5 illustrates the market for pizza.
a.Label the curves. Which curve shows the willingness to pay for a pizza? b.If the price of...