Problem_Set_1 - Department of City & Regional Planning...

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Department of City & Regional Planning CP 113A – Fall, 2006 University of California, Berkeley Mark R. Wolfe PROBLEM SET # 1 Due in Class Tuesday, September 12, 2006 **IMPORTANT: KEEP A COPY OF YOUR COMPLETED PROBLEM SET** 1. For each set of facts, identify the effect on the market equilibrium price (P) and quantity (Q) of the good, and illustrate your answer with a graph showing an original supply curve (S) and demand curve (D), and, as appropriate, new curves S’ and D’. Assume that all goods described are normal goods, and that all other things remain equal ( ceteris paribus ). a. The price of rubber and canvas rises sharply. What happens to the price and quantity sold of tennis shoes? b. A severe drought wipes out the entire grape crop in California. What is the likely affect on the price and quantity sold of beer? Identify any assumptions you make. c. The student population at U.C. Berkeley doubles. What is the effect on the price and quantity sold of textbooks on campus? Of gold jewelry sold on campus? (Draw 2 graphs – are the curves shaped differently?.)
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Problem_Set_1 - Department of City & Regional Planning...

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