Scenario:
A doctoral student has just completed a study for her dissertation and found the following demand and supply schedules for hand held computers to be as follows:
|
Price/Computer
|
Quantity Demanded
|
Quantity Supplied
|
|
$200
|
1000
|
2200
|
|
175
|
1250
|
2050
|
|
150
|
1500
|
1900
|
|
125
|
1750
|
1750
|
|
100
|
2000
|
1600
|
|
75
|
2250
|
1450
|
|
50
|
2500
|
1300
|
|
25
|
2750
|
1150
|
Questions:
1. Using Microsoft Excel, draw a graph illustrating the supply and demand in this market.
2. What is the equilibrium Price and Quantity in the market?
3. Now suppose the government imposes a special tax on these computers. Describe what would happen in this market in terms of the supply and demand curve. A tax on suppliers shifts the supply curve by the amount of the tax.
4. Disregard the new tax in part three. Now assume that the government imposes a price ceiling of $100 in this market, as a result of protests of price gauging by the sellers. What would happen to the price and quantity in this market?
5. Disregard the events of part four. Assume that the manufacturers of this product lobby the government's lawmakers, in terms of this product being an essential for college students but they are considering halting production due to the lack of profits. The lawmakers agree and now set a price floor at $150. What would happen in this market?
If consumers' expectations were such that they were concerned about the economy and jobs, what would you think would happen in this market?