# HW2 - University of Southern California Department of...

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Unformatted text preview: University of Southern California Department of Economics ECON 205 Principles of Macroeconomics Spring 2007 Prof. Safarzadeh Assignment # 2 I ~ Student Name: I q I -Market analysis: In each problem below, you are to illustrate the market for textile with the appropriately shaped standard demand and supply curves. In each case, draw the shift in the demand and supply which result from the actions taken in the market or changes in related variables. Indicate in the space provided wether each variable and demand and supply will increase (+), decrease (-), remain unchanged (0), or have ambiguous sign (?). Please, number the curves so that the direction of each shift will be clear. Mark the original equilibrium by El and the final equilibrium by E2. Also, assume that none of the curves are perfectly inelastic or perfectly elastic i.e., the standard demand-supply model. Textile is assumed to be a nonnalgood. . 1. The economy is in expansion and GDP is increasing. P P') Demand :.+ I Supply: ...8 f I Equilibri~ ~u.antity :..-+: \. I 01,.. EquIlIbnum PrIce : .+ I I Q ., , ~, (si,.. 2. The government levies new sales taxes on textile and collects it from the producers. <;'1. P /) I ~ f Deman~ :.-:!!;' rj,. L Supply. 0 I Equilibri~ ~u.antity .:..'::'::"" , \ EquIlIbnum PrIce : ...r cD l Q Q'} ~'-. 3. Price of cotton (input in production of textile) is decreasing. P I ~ 2.- Demand :..'!; I Supply: T .L- V) I Equilibrium Quantity :..1.. r ':\ I Equilibrium Price: ..:7:':'""" f1- I I 1 Q Q \ 4. GDP is rising and price of cotton in declining. P I S Demand :..+ ), 2 Supply: .+ R ~- Equilibri~ ~u.antity .:..* \ I 2.- EquilIbnum PrIce : ( I . 1 IQ Q £2 \ ~ 5. GDP is rising and price of op~n is rising. P 'P . 1..., Demand ...+ Supply : ..~ ~ Equilibrium Quantity :..2.. , \) V Equilibrium Price: .+. Q 6. There is expectations of higher prices for textile products. ~"L P f ~---"- ~ , Demand :..t. '1 1 Supply : ~ J) 1 e Equilibrium Quantity :..'2. 0"" I --- ) (~ Equilibrium Price: ..+- 'I "-'2-- I , P \ I 'l QA/Q Q , 2- Market demand and supply functions for a product are given as Qd = 100 -2P and Qs = .5P respectively, where Qd is quantity demanded, Qs is quantity supplied and P is the market price.. a. Equilibrium price and quantity for the product are \$ ~ Il and 2..~ units, respectively. b. At the market price of \$50.00, quantity demanded is ..a: units, quantity supplied is ~~ units and there is a ~~~~ -of ? ~ units of the good in the market....
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## This note was uploaded on 03/08/2009 for the course ECON 20091_ECO taught by Professor Mohammadsafarzadeh during the Spring '09 term at USC.

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HW2 - University of Southern California Department of...

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