Problem_Set_3_Supply_&_Demand

Problem_Set_3_Supply_&_Demand - 69 Problems on...

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Unformatted text preview: 69 Problems on Supply and Demand. Problem 3.1. When the price of fresh fish rises in the local supermarket, the quantity of fresh fish sold decreases. Is this a decrease in the quantity demanded of fresh fish or is it a decrease in the demand for fresh fish? Problem 3.2. When the price of sneakers rises the quantity of sneakers produced increases. Is this an increase in the quantity supplied of sneakers or is it an increase in the supply of sneakers? Problem 3.3. What is the meaning of the statement that In a competitive market for a commodity the market price adjusts so that the market clears.? Problem 3.4. Suppose that the market demand and supply curves for fresh fish have the equations Q D = 60- 5 p tons and Q S = 10 p tons. p , measured in dollars per ton of fresh fish, is the price of fresh fish. Q D , measured in tons, is the quantity demanded of fresh fish. Q S , measured in tons, is the quantity supplied of fresh fish. (i) On a graph with the per unit price p measured on the vertical axis and the quantities demanded and supplied, Q D and Q S , measured on the horizontal axis, draw both the demand curve and the supply curve for the fresh fish market. Clearly label both axes. (ii) Suppose the per unit market price is p = $6 per ton of fresh fish. At this price does the market clear? If not, then is there an excess quantity demanded or an excess quantity supplied? How big is this excess? Would you expect the market price to change? If so, then which way does the price change; up or down? (iii) Suppose the per unit market price is p = $3 per ton of fresh fish. At this price does the market clear? If not, then is there an excess quantity demanded or an excess quantity supplied? How big is this excess? Would you expect the market price to change? If so, then which way does the price change; up or down?...
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This note was uploaded on 03/01/2011 for the course ECO 182 taught by Professor Morgan during the Spring '08 term at SUNY Buffalo.

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Problem_Set_3_Supply_&_Demand - 69 Problems on...

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