Supply And Demand - Chapter 3 (Page 34 of 37) in pdf

Chapter 3: Supply and Demand

Problem Set

Answers to even-numbered Questions and Problems can be found on the text Web site at

1. Consider the following statement: “In 2005 and 2006, as at

Price per

Quantity

many other times, new home building in most American

Alarm Clock

Demanded

Supplied

cities slowed, and the price of housing came down.

$ 5

3,500

700

Therefore, one way for a city to bring down home prices is

$10

3,000

900

to use zoning regulations that slow down new home build-

$15

2,500

1,100

ing.” True or false? Explain.

$20

2,000

1,300

$25

1,500

2. In the late 1990s and through 2000, the British public

$30

1,000

1,700

became increasingly concerned about “Mad Cow Disease,”

$35

500

1,900

which could be deadly to humans if they ate beef from these

cattle. Fearing the disease, many consumers switched to

a. Graph the demand and supply curves.

other meats, like chicken, pork, or lamb. At the same

b. Find the equilibrium price and quantity.

time, the British government ordered the destruction of

c. Illustrate on your graph how a decrease in the price of

thousands of head of cattle. Illustrate the effects of these

telephone wake-up services would affect the market for

events on the equilibrium price and quantity in the market

alarm clocks.

for British beef. Can we determine with certainty the direc-

d. What would happen if there was a decrease in the price

tion of change for the quantity? For the price? Explain

of wake-up services at the same time that the price of

briefly.

the plastic used to manufacture alarm clocks rose?

3. Discuss, and illustrate with a graph, how each of the fol-

6. The following table gives hypothetical data for the quantity

lowing events will affect the market for coffee:

of electric scooters demanded and supplied per month.

a. A blight on coffee plants kills off much of the Brazilian

crop.

Price per

Quantity

b. The price of tea declines.

Electric Scooter

Demanded

Supplied

c. Coffee workers organize themselves into a union and

$150

500

250

gain higher wages.

$175

475

350

d. Coffee is shown to cause cancer in laboratory rats.

$200

450

e. Coffee prices are expected to rise rapidly in the near

$225

425

550

future.

$250

400

650

4. The following table gives hypothetical data for the quantity

$275

375

750

of two-bedroom rental apartments demanded and supplied

in Peoria, Illinois:

a. Graph the demand and supply curves.

b. Find the equilibrium price and quantity.

Quantity

c. Illustrate on your graph how an increase in the wage

Monthly

Demanded

Supplied

rate paid to scooter assemblers would affect the market

Rent

(thousands)

for electric scooters.

$ 800

d. What would happen if there was an increase in the

$1,000

wage rate paid to scooter assemblers at the same time

$1,200

that tastes for electric scooters increased?

$1,400

7. The following table gives hypothetical data for the quantity

$1,600

of gasoline demanded and supplied in Los Angeles per

$1,800

month.

a. Graph the demand and supply curves.

Quantity

b. Find the equilibrium price and quantity.

Demanded

Supplied

c. Explain briefly why a rent of $1,000 cannot be the

Price per

(millions

equilibrium in this market.

Gallon

of gallons)

d. Suppose a tornado destroys a significant number of

apartment buildings in Peoria, but doesn’t affect peo-

$1.20

170

ple’s desire to live there. Illustrate on your graph the

$1.30

156

105

effects on equilibrium price and quantity.

$1.40

140

$1.50

123

175

5. The following table gives hypothetical data for the quantity

$1.60

100

210

of alarm clocks demanded and supplied per month.

$1.70

238

Supply And Demand - Chapter 3 Page 34

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