1. Consider the following weekly supply and demand tables for product X:

P 16 14 12 10 8 6 4 2

Qd 0 5 10 15 20 25 30 35

Qs 35 30 25 20 15 10 5 0

a. Draw the supply and demand curves on the same diagram. Determine the equilibrium price and quantity and demonstrate it in your graph.

b. Demonstrate the impact of a government price control set at P = $14. Demonstrate by number and in the graph. Discuss your answer.

c. Calculate the ARC elasticity of demand (midpoint formula) when the price moves from $6 to $2. Write the formula and show your work.

d. Redraw the Demand curve (only) in a new diagram. Demonstrate the Total Revenue change geometrically and indicate the Loss and Gain areas between the prices of $6 and $2 (Price has moved UP from $2 to $6).

e. In this diagram as above (part d), demonstrate and calculate the Consumer Surplus when price is set at $12 (P=12).

f. If for a product, a 10% increase in consumer income leads to a 20% decrease in sale, how would you evaluate the Income Elasticity of Demand? Is this a Normal Good or an Inferior good? Calculate the Income elasticity of Demand first and then give your explanations for both questions.

g. If a 10% increase in the product such as Y, leads to a 20% increase in the sale of Product X, then what can you say about the Cross Elasticity of Demand for X & Y? Are X & Y Substitutes or Complements? Calculate and Explain