Micro tut 3 Class Problems - Business Macro/Microeconomics...

Business Macro/Microeconomics, Tutorial 3
CFO: POM, 9 th edition Chapter 3 . ,MP: M, Ch 9 th ed. Chapter 3
Tutorial 3 Demand and Supply
Class Problems and Applications:
1. William Gregg owned a mill in South Carolina. In December 1862, he placed a notice in the
Edgehill Advertiser announcing his willingness to exchange cloth for food and other items.
Here is an extract:
1 yard of cloth for 1 pound of bacon
2 yards of cloth for 1 pound of butter
4 yards of cloth for 1 pound of wool
8 yards of cloth for 1 bushel of salt
a. What is the relative price of butter in terms of wool?
b. If the money price of bacon was 20¢ a pound, what do you predict was the money price
of butter?
c. If the money price of bacon was 20¢ a pound and the money price of salt was $2.00 a
bushel, do you think anyone would accept Mr. Gregg’s offer of cloth for salt?
2. Place the following goods and services into pairs of likely substitutes and into pairs of likely
complements. (You may use an item in more than one pair.) The goods and services are:
coal, oil, natural gas, wheat, corn, rye, pasta, pizza, sausage, skateboard, roller blades,
video game, laptop, iPod, cell phone, text message, email, phone call, voice mail
3. The following events occur one at a time:
(i) The price of crude oil rises.
(ii) The price of a car rises.