101Study_Questions_2DDSS_1_

# 101Study_Questions_2DDSS_1_ - Study Questions#2 The Market...

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Study Questions #2 - The Market Model: Demand and Supply 5 UNIVERSITY OF WATERLOO Department of Economics Economics 101 - Study Question #2 E. Lau PART A - Short Answers 1. What are the main determinants of: a) market demand for commodity X b) market supply for commodity X 2. Distinguish between movements along a demand curve/supply curve and shifts of the curves. 3. Use the following diagrams to illustrate the effect of: 4. Draw a demand and a supply curve and: a) show the equilibrium quantity of labour market. b) show the effect of a minimum hourly wage (price of labour) if it is set above the equilibrium wage. c) show the equilibrium wage when numerous new firms move into the area and increase hiring. 5. a) The supply curve for butter is Q S = 100 + 3P where Q S is the quantity supplied of butter (in millions of pounds per year) and P is the price of butter (in dollars per pound). If the demand curve for butter is a vertical line at Q D = 106 millions of pounds per year, and if the government imposes a price floor of \$1 per pound on butter, will there be an excess supply or excess demand of butter, and how big will it be? b) If the government’s price floor is set at \$3 per pound, will there be an excess supply or excess demand of butter, and how big will it be? c) Under the conditions described in part (a), what is the price elasticity of demand of butter? Do you regard this as a realistic value for this price elasticity? Explain.

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Study Questions #2 - The Market Model: Demand and Supply 6 6. What is meant by: a) price elasticity of demand b) cross elasticity c) income elasticity 7. The elasticity of demand declines as we move down along a linear demand curve. True or False? Explain.
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101Study_Questions_2DDSS_1_ - Study Questions#2 The Market...

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