PS2 - Economics 102 Introductory Macroeconomics Spring 2005...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 102 Introductory Macroeconomics - Spring 2005, Professor J. Wissink Problem Set 2 1. The labor market in Tompkins County is given by the following table: Salary per worker per year (thousand $) Workers supplied per year (thousands) Workers demanded per year (thousands) 10 10 70 20 30 60 30 50 50 40 70 40 50 90 30 a) Graph the demand and supply curves of this market. What are the equilibrium price and quantity? b) Using your graph, show the impact of a minimum salary law set by the government at $40 thousand per year. Calculate any surplus or shortage that occurs because of this policy. c) Suppose the government decides to offer unemployment compensation of $7,000 per year to any unemployed worker. To receive this unemployment benefit, a worker must: (a) have been employed before the floor price was introduced; and (b) have become unemployed because the salary floor was introduced. Estimate the number of workers that will receive unemployment compensation and the cost of this program to the government. 2. Suppose the demand and supply for newspapers are described by the following equations: Demand: X D = 1450 – 100P and Supply: X S = -125 + 125P (Where "P" is measured in dollars and X in number of newspapers, in thousands.) a) Graph the curves and find the equilibrium price and quantity. b) Due to the introduction of “news portals” on the internet, the demand curve shifts, becoming X D = 1000 – 100P. Show this shift and find the new equilibrium. c) The government decides it wants to protect newspaper editors from this change in market conditions and decides to implement a price floor of $4 per newspaper. What will be the effect of this floor on the newspaper market? What if the price floor is $6 per newspaper? Be specific. d) Comment on the following statement: "Removal of controls would result in an increase in demand but at a higher price, which would benefit newspaper editors." Is this correct? 3. Consider the market for “Fast Food” burgers. Listed below are some events that could have some effect on one or more of the following with respect to this burger market: quantity demanded, quantity supplied, equilibrium price and quantity, demand, and supply. Indicate which of the above are directly affected and in what direction (i.e., increase, decrease, etc.). Analyze and graphically illustrate each situation/event separately (do not add the events one on top of the other). a) There is a rise in the wholesale price of ground beef. b) There is a price reduction in the market for “Fast Food” fajitas (a close substitute for these hamburgers). c) There is a new outburst of the “Mad-Cow” disease.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern