Econ 213 Problem set 1 Liberty

Topics: Supply and demand, Economic surplus, Microeconomics Pages: 6 (505 words) Published: November 7, 2014
Problem Set 1
Name:______________________

Problem Set 1 is to be completed by 11:59 p.m. (ET) on Monday of Module/Week 2.

1. Based on the information provided for the market for video games, answer the following questions.

PRICE
Q DEMANDED
Q SUPPLIED
$50
5
9
$45
7
7
$40
9
5
$35
11
3
$30
13
1

a) Draw and properly label the demand and supply graphs (this means you must label the axes and any lines you include on the graph). b) What is the equilibrium price and quantity?

b.) PRICE: ______$45_____________QUANTITY: _____7______________

Now, assume that a new government report claims that video game play stimulates the brain. c) What will this do to the demand curve? Of the available list of things in the text that causes a change in demand, which best fits here as the cause of the demand shift? d) What will happen to the equilibrium price and quantity?

c) The demand curve will rise. Changes in consumer taste & preferences.

d) The equilibrium price will rise and the quantity will decrease (the equilibrium point will move up and to the left).

e) P: __RISE_________________Q: _________DECREASE__________

2. Based on the following information for the state of Montana, a. Draw the Production Possibilities Curve.
b. Determine the opportunity costs for a move from A to B; B to C; and C to D.

CHOICE
OIL / barrels
WHEAT / bushels
A
5000
0
B
4500
10000
C
2500
20000
D
0
25000

a.)

b.) A to B: _500≠10,000_B to C: _2000≠20,000_ C to D: _2500≠5000__

3. In the space provided you are to do a number of things:
a. Draw and properly label a demand and supply curve.
b. Indicate where the equilibrium Price and Quantities are located. c. How do things change based on the following scenario?
The market for hybrid cars is changing. There are more providers but due to bad publicity and poor performance, demand is falling.

Knowing this information, you need to first tell me, and then show this in your graph:

1) What is the market you are dealing with? COMPETITIVE MARKET

2) Which curve(s) change and based on the lists in the text of what causes demand and supply to shift what are the causes of theses shifts? PERSONAL CHOICE BASED ON THE BAD PUBLICITY.

3) In what direction do they change? DOWN TOWARD THE LEFT

What happens to the equilibrium price and quantity after these changes are put into effect? Do they go up, down or stay the same?

P: A IS 20000 / B IS 16000___Q: _A IS 5000 / B IS 3800_

A= 20000 AND 5000 INITIAL EQUILIBRIUM
B= 16000 AND 3800 UNITS IS THE EQUILIBRIUM AFTER THE DECREASE

4. Using the following information for individuals and their willingness to pay for a bottle of ginger ale, calculate the total consumer surplus at a market price of $5.

Maximum amount a buyer would pay for ginger ale
Scott
$10
Dennis
$4
Greg
$8
Dave
$7
Mike
$5

Using the information below about willingness to supply ginger ale, calculate the total producer surplus at a market price of $5.

Marginal cost of producing ginger ale
Gene
$6
Brandon
$3
Matt
$2
Cooper
$11
Jed
$5

How do your answers change if the price falls to $2?
4A4B

THERE WILL BE LESS SURPLUS IN BOTH EXAMPLES REDUCING THE PRICE BY TWO DOLLARS.
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