1. (a) Consider a demand curve of the form Qd=20-2P. Also consider a supply curve of the form Qs=2P-4. Graph both curves using an appropriate scale for 2
(b) Suppose at each price individuals demand four more units of output, that is, the demand curve shifts to Qd=24-2P. Graph this new curve on the same diagram from part (a) for 2
(c) Solve the problem in part (a) algebraically.
(d) Solve the problem in part (b) algebraically.
2. Use supply and demand curves to analse the following situations:
(a) A new study shows that antioxidants, which help in the prevention of cancer, and a new crop rotation technique is discovered which allows beans to be grown more easily. Analyse what happens in the market for beans.
(b) When war broke out in the Middle East, many markets were affected. Most of the worls's oil production takes place in this region. Analyse (i) what happens in the market for oil; and (ii) what happens in the market for sports utility vehicles as a result of the war.
3. Consider the market for trucks. Assume that the demand for trucks is given by Qd=60-2P+5Y where P is price per truck and Y is the income of the buyers. The supply of trucks is given by Qs=30+5P-3W where W is the price of all materials needed to produce a truck. Solve for the equilibrium price P* and equilibrium quantity Q* of trucks bought and sold.