1
Economics 102
Spring 2010
Home Assignment #2
Due2/17/10 at the lecture
Directions:
The homework will be collected in a box
before
the lecture. Please place
your name, TA name and section number on top of the homework (legibly). Make sure
you write your name as it appears on your ID so that you can receive the correct grade.
Please remember the section number for the section
you are registered,
because you will
need that number when you submit exams and homework. Late homework will not be
accepted so make plans ahead of time.
Please show your work.
Good luck!
Problem 1
The following table gives the demand and supply for pairs of winter boots at two
different prices.
Assume that the demand and supply functions are linear.
Price
Quantity
Demanded
Quantity
Supplied
30
720
90
120
180
360
(a) Calculate the demand and supply functions for this market.
Use the information in the table to find the equations of the 2 lines.
Demand: P = (-1/6) Q
d
+ 150
Supply: P = Q
s
/3
(b) Find the equilibrium price and quantity in this market.
Set the demand and supply equations equal to each other to find the equilibrium values.
(-1/6) Q + 150 = Q/3
Q=300
Plug the equilibrium quantity of 300 into the demand or supply equation to find the
equilibrium price.
P = 300/3 = 100
(c) The government puts a tax of $5 on each pair of winter boots, requiring producers to
give the government $5 for every pair they sell.
(i) What will the new equilibrium price and quantity be in the boot market once
this tax is implemented?
Hint: the numbers in this question are not “nice”: you
may want to use a calculator when doing this set of questions.
The supply curve shifts leftward as a result of this tax.
For every quantity, the
price they charge will be $5 higher.
The new supply curve is given by

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