Assignment
Part 1
Everyone make sure to cite some published material other than your textbook (news article. journal article. etc.) related to your posts.
Demand and Supply
The concept of supply and demand must make some sense.. Let's discuss this in context of different markets. One example could be the effect of gasoline supply to the demand of automobiles. In other words, how consumers of automobile industry react to decisions of gasoline suppliers?. Bring some real world examples of market interactions where supply and demand of one or more products impacted your decisions.
Part 2
Answer all of the following questions in Microsoft Word File with complete questions and answers and attach it. Correct answer to each question is worth up to 8 points.
1. Assuming that you need two types of goods to survive and you have absolute advantage in producing these goods: will there be a possibility where you can improve your consumption with trade? If so, what is the underlying reason?
2. Using demand and supply curves, show the effect of each of the following on the market for cigarettes:
1. A cure for lung cancer is found.
2. The price of cigars increases.
3. Wages increase substantially in states that grow tobacco.
4. A fertilizer that increases the yield per acre of tobacco is discovered.
5. There is a sharp increase in the price of matches, lighters, and lighter fluid.
6. More states pass laws restricting smoking in restaurants and public places.
3. Assume the market for corn is depicted as in the table that appears below.
7. Complete the table below.
8. What is the equilibrium price?
|
Price per
Bushel
|
Quantity Demanded (millions of bushels)
|
Quantity Supplied (millions of bushels)
|
Surplus/ Shortage
|
Will Price Rise or Fall?
|
|
51.80
|
320
|
200
|
|
|
|
7 00
|
300
|
710
|
|
|
|
2.20
|
270
|
270
|
|
|
|
2.40
|
230
|
300
|
|
|
|
2.60
|
200
|
330
|
|
|
|
2.80
|
180
|
350
|
|
|
4. Consumers demand less quantity when prices rise and demand more when prices fall. Give an example from the real world or your personal buying behavior that verifies the law of demand.
5. Calculate the price elasticity of supply for each of the following combinations of price and quantity supplied. In each case, determine whether supply is elastic, inelastic, perfectly elastic, perfectly inelastic, or unit elastic in each case.
a. Price falls from $2.25 to 51.75; quantity supplied falls from 600 units to 400 units.
b. Price falls from $2.25 to $1.75; quantity supplied falls from 600 units to 500 units.
c. Price falls from $2.25 to $1.75; quantity supplied remains at 600 units.
d. Price increases from $1.75 to 52.25; quantity supplied increases from 466.67 units to 600.