Name: Christen Brown
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: $45.00 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.) With claims that the video game is stimulating, the demand curve will shift to the right. Of all the reasons for change in demand listed in our text, the one that best describes this situation is changes in consumer tastes and preferences. This fits most appropriately because it describes changes due to new information. In this situation with the video game, the government released new, positive information to the consumers, which increased demand.
d.) P: The price will increase. Q: The equilibrium quantity will increase.
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 barrels of oil for 10,000 bushels of wheat.
B to C: 2,000 barrels of oil for 10,000 bushels of wheat.
C to D: 2,500 barrels of oil for 5,000 bushels of wheat.
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