Supply and Demand and Godiva Chocolate

Topics: Supply and demand, Consumer theory, Price elasticity of demand Pages: 3 (540 words) Published: January 9, 2014
MICROECONOMICS ASB-2301 ----

EXERCISES – HANDOUT 1

1. Demand and supply (A)
a) Suppose that there is an announcement that chocolate causes cancer. What would happen to equilibrium price and quantity in the market for Godiva chocolate? b) Suppose that the price of Hershey’s chocolate increases. What would happen to equilibrium price and quantity in the market for Godiva chocolate?

c) Suppose that the price of sugar increases. What would happen to equilibrium price and quantity in the market for Godiva chocolate?
d) Suppose that a company invents a better machine for mixing the ingredients to make chocolate candies. What would happen to equilibrium price and quantity in the market for Godiva chocolate?
e) Suppose the equation for demand can be expressed as P = 20 – Q. The equation for supply can be expressed as P = Q. Find the equilibrium price and quantity. f) Suppose the equation for demand can be expressed as P = 40 – 2Q. The equation for supply can be expressed as P = Q. Find the equilibrium price and quantity. g) Suppose the equation for demand can be expressed as P = 30 – Q. The equation for supply can be expressed as P = 2Q. Find the equilibrium price and quantity.

2. Demand and supply (B)
a) If the demand and supply curves for computers are:

D = 100 - 6P, S = 28 + 3P
where P is the price of computers, what is the quantity of computers bought and sold at equilibrium?
b) The quantity demanded of Good Z depends upon the price of Z (Pz), monthly income (Y), and the price of a related Good W (Pw). Demand for Good Z (Qz) is given by: Qz = 150 - 8Pz + 2Y - 15Pw
Find the demand equation for Good Z in terms of the price for Z (Pz), when Y is $50 and Pw = $6.
c) Beef supplies are sharply reduced because of drought in the beef-raising states, and consumers turn to pork as a substitute for beef. How would you illustrate this change in the beef-market in supply-and-demand terms?

d) In December, the price of Christmas trees rises and the quantity of...
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