October 6, 2012
[ OSCAR DIEZ
GE273 HOMEWORK-WEEK-03] ITT Technical Institute, Wilmington, MA
WEEK O3 ASSIGNMENTS
I. Watch video in Myeconlab about "what drives the market". Write a summary II. Problems 4.12 on page 94, 4.15 on page 95, 3.6 on page 122, and 3.14 on page123. ========================= I.
VIDEO SUMMARY
"What Drives the Market" After I saw the video in "What Drives the Market" I can say that this video is about supply and demand and what rule those economics main variables. Basically both speakers, (Susan k. Laury from Georgia University, and Robert Whapels form wake forest university), agreed that supply is more about "the cost of making something" while Demand is more about " what people want/needs and how much they are willing to pay for". Those two main variables are playing a higher important role on what economics is about. II.
Review Questions
CHAPTER 03 pages 94-95 4.12 Briefly explain whether each of the following statements is true or false.
a.
If the demand and supply for a product both increase, the equilibrium quantity of the product must also increase. TRUE. why? see equilibrium quantity definition a nd Marketing equilibrium page 78.
b.
If the demand and supply for a product both increase, the equilibrium price of the product must also increase. FALSO. why? demand could be highest that supply
c.
If the demand for a product decreases and the supply of the product increases, the equilibrium price of the product may increase or decrease', depending on whether supply or demand has shifted more. FALSE. Why? more offer& less demand. It means less price (Marketing equilibrium).
4.15 Following are four graphs and four market scenarios, each of which would cause either a movement along the supply curve for Pepsi or a shift of the supply curve. Match each scenario with the appropriate graph to answer those question let said that D1& D2 Pepsi
a. A decrease in the supply of Coke Graph 01. the demand of Pepsi increase (transfer to the right). It looks like people are demanding more of this product. it could be a consequence supply of coke decrease b. A drop in the average household income in the United States from $44,000 to $43,000 Graph 04 Since it is not a primary food basket product, less less income ends in less demand c. An improvement in soft drink bottling technology Graph 03. better technology more offers (more supply) supply) d. An increase in the prices of sugar and high-fructose corn syrup Graph 02. less demand because because price increase CHAPTER 03:Where Prices Come From: The Interaction of Demand and Supply CHAPTER CHAPTER CHAP TER 04: Economi c Efficiency , Government Price Setting, and Taxes Teacher: Tea cher: Mr. McIntyre-(Micro McIntyre-(M icro econom ics) ITT Te Techni chni cal Institu te, Wilmin gton , MA
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October 6, 2012
[OSCAR DIEZ
GE273 HOMEWORK-WEEK-03] ITT Technical Institute, Wilmington, MA
III.
Problems and Applications
CHAPTER 04 pages 122-123 3.6
Use the information on the market in the table to answer the following questions. a. What are the equilibrium price and quantity? How much revenue do kumquat producers receive when the market is in equilibrium? Draw a graph showing the market equilibrium and the area representing the revenue received by kumquat producers.
PRICE $10 $15 $20 $25 $30 $35
Qd 120 110 100 90 80 70
Qs 20 60 100 140 180 220
$40 $35 $30 $25 e c i r P
$20
Demand
$15
Supply
$10 $5 $0 0
50
100
150
200
250
Quantity Millions per year
According to the graph equilibrium, price and qua ntity are $20 and 100 million/year respectively. The revenue received when the market is 20x100,000,000 is equal =$2000,000,000/year b.
Suppose the federal government decides to impose a price floor of $30 per crate. Now how many crates of kumquats will consumers purchase? How much revenue will kumquat producers receive? Assume that the government does not purchase any surplus kumquats. On your graph from question (a), show the price floor, the change in the quantity of kumquats purchased, and the revenue received by kumquat producers after the price floor is imposed. 30x80,000,000 is equal =$2400,000,000/year
c.
Suppose the government imposes a price floor of $30 per crate and purchases any surplus kumquats from producers. Now how much revenue will kumquat producers receive? How much will the government spend on purchasing surplus kumquats? On your graph from question (a), show the area representing the amount the government spends to purchase the surplus kumquats.
from the graphic/table the revenue will kumquat producers receive= b (30x80,000000= 2400,000,000)+ 30x100,000,000=5400,000,000 3.14 (Related to Solved Problem 4-3 on page 1 09) Use the information on the market for apartments in Bay City in the table below to answer the following questions. a. In the absence of rent control, what is the equilibrium rent, and what is the equilibrium quantity of apartments rented? Draw a demand and supply graph of the market for apartments to illustrate your answer. In equilibrium, will there be any renters who are unable to find an apartment to rent or any landlords who are unable to find a renter for an apartment?
PRICE $500 $600 $700 $800 $900 $1,000
Qd 375000 350000 325000 300000 275000 250000
Qs 225000 250000 275000 300000 325000 350000
$1,200 $1,000 e c i r P
$800 $600
Demand
$400
Supply
$200 $0 0
200000
400000
Quantity
According to the graph equilibrium price and quantity are $800 and 300,000 million/year respectively. The revenue receive when the market is 800,x300,000 is equal =$240,000,000/year b.
Suppose the government sets a ceiling on rents of 600 per month. What is the quantity of apartments demanded, and what is the quantity of apartments supplied? If the governments maximum rents price allowed is $600/month, the quantity demand (Qd) is 350,000 and quantity supply is 250,000
CHAPTER 03:Where Prices Come From: The Interaction of Demand and Supply CHAPTER 04: Economi c Efficiency , Government Price Setting, and Taxes Teacher: Mr. McIntyre-(Micro econom ics) ITT Techni cal Institu te, Wilmin gton , MA
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