PAM_200_Spring_2007_Graphing_Homework

PAM_200_Spring_2007_Graphing_Homework - PAM 200, Spring...

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PAM 200, Spring 2007 Graphing Homework Due in section the week of March 26 Relevant reading: Perloff, chapter 9-11 1. Draw market supply and market demand curves for fast food dinners. a. Label the equilibrium price and quantity of fast food dinners in the market. b. Label consumer surplus and producer surplus. c. More than 60% of Americans are clinically overweight or obese. Suppose the government decides to try and reduce obesity by taxing producers of fast food by T dollars per dinner. i. Re-draw the old supply and demand curves and illustrate any shifts of the two curves ii. Label the new equilibrium price and quantity; how have these changed as a result of the tax? iii. Review: what determines the extent to which fast food restaurants can simply “pass on” the tax to consumers in the form of higher prices? iv. Illustrate how consumer surplus, producer surplus, government revenue, and deadweight loss have changed as a result of the tax. 2. Draw market supply and demand curves for sport utility vehicles (SUVs). Suppose that, to increase revenues, Congress decides to assess a lump-sum tax of \$T on people who buy SUVs. a. Illustrate any shifts of the demand and supply curves b. Label the new equilibrium quantity, pre-tax price and after-tax price; how have quantity and after-tax price changed as a result of the tax? c. Using a table, illustrate how consumer surplus, producer surplus, government revenue, and deadweight loss have changed as a result of the tax. 3. Graph the welfare effects of rent control legislation that sets monthly rent below the competitive equilibrium price. a. Label on your graph the equilibrium price and quantity before and after the legislation takes effect. State how price and quantity change as a result of the policy intervention. b. Does the rent control create excess demand, excess supply, or neither? If it does create one or both, indicate them on the graph. c.

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This note was uploaded on 03/30/2009 for the course PAM 2000 taught by Professor Evans,t. during the Spring '07 term at Cornell.

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PAM_200_Spring_2007_Graphing_Homework - PAM 200, Spring...

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