Econ 213 Problem set 1 Liberty

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