Name: ___Christian Collins___________________________________________
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.
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.) Changes in consumer tastes & preferences, because they are acquiring new information from this “government report”
d.) P: __theoretically, it would go up_____ Q: ____go up, as well in this case____________
People would be willing to pay more because of the benefit of brain stimulation & new buyers may enter the market who previously didn’t buy thinking video games were garbage for a child’s brain. However, changes in consumer tastes and preferences can increase OR decrease demand for specific goods. (p.51 of our textbook)
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.
OIL / barrels
WHEAT / bushels
b.) A to B: _500 fewer barrels of oil, but 10,000 bushels of wheat whereas at “A” there was no wheat_
B to C: _way down to 2500 barrels of oil with an increase of another 10k in