PROBLEM SET 2

PROBLEM SET 2 - PROBLEM SET 2 Supply and Demand Department of Economics Temple University A Xanadu The market for pleasure domes in the country of

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PROBLEM SET 2 Supply and Demand Department of Economics Professor William J. Stull Temple University Economics 92 A. Xanadu The market for pleasure domes in the country of Xanadu is perfectly competitive. The supply and demand schedules for this market are given below. Price Quantity Demanded Quantity Supplied ------------------------ ------------------------ ------------------------ 20 150 30 40 140 60 60 130 90 80 120 120 100 110 150 1. Carefully plot the demand schedule in Figure A and connect the dots. 2. What is the slope of the line you have drawn? _____________ 3. Estimate quantity demanded if price is zero. _____________ 4. Plot the supply schedule in Figure A. 5. What is the slope of this line? _____________ 6. What are equilibrium price and quantity? ________________ ________________ 7. Suppose the government of Xanadu imposes a price ceiling of $40 per dome? What is excess demand? ____________ _ 8. Alternatively, suppose the government imposes a price floor of $100 per dome. What is excess supply? ____________ _ 9. Show your answers to the preceding two problems in Figure A.
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Figure A
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B. Beeburgh The markets for five products in Beeburgh are known to be perfectly competitive. In each graph shown below draw generic supply and demand curves, labeling them S 1 and D 1 respectively. Then draw the new supply and/or demand curves in each market resulting from the indicated outside event (or events). Label these S 2
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This note was uploaded on 04/28/2011 for the course ECON 1102 taught by Professor Tomczyk during the Spring '09 term at Temple.

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PROBLEM SET 2 - PROBLEM SET 2 Supply and Demand Department of Economics Temple University A Xanadu The market for pleasure domes in the country of

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