ASSIGNMENT -
1. Illustrate each of the following events using a demand and supply diagram for bananas.
a. Reports surface hat imported bananas are infected with a deadly virus.
b. Consumers' incomes drop.
c. The price of bananas rises
d. The price of oranges falls.
e. Consumers expect the price of bananas to decrease in the future.
2. Answer true or false. If false, change it to make it true. Illustrate your answer on a demand and supply graph.
a. An increase in demand is represented by a movement up the demand curve.
b. An increase in supply is represented by a movement up the supply curve.
c. An increase in demand without an changes in supply will cause the price to rise.
d. An increase in supply without any changes in demand will cause the price to rise.
3. Using the following schedule, define equilibrium price and quantity. Describe the situation at a price of $10. What will occur? Describe the situation at a price of $2. What will occur?
|
Price
|
Quantity Demanded
|
Quantity Supplied
|
|
$1
|
500
|
100
|
|
2
|
400
|
120
|
|
3
|
350
|
150
|
|
4
|
320
|
200
|
|
5
|
300
|
300
|
|
6
|
275
|
410
|
|
7
|
260
|
500
|
|
8
|
230
|
650
|
|
9
|
200
|
800
|
|
10
|
150
|
975
|
4. Suppose the government imposed a minimum price of $7 in the schedule of exercise 3. What would occur?
5. In exercise 3, indicate what the price would have to be to represent an effective price ceiling. Point out the surplus or shortage that results. Illustrate a price floor and provide an example of a price floor.