mgnt_6005_chapter3[1] - Managerial Economics 6005 Chapter 3...

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Managerial Economics – 6005 Chapter 3 Homework Chapter: 3 P3.1 Demand and supply curves. The following relations describe monthly demand and supply conditions in the metropolitan area for recyclable aluminum: Qd = 317,500 - 10,000p (demand) Qs = 2,500 + 7,500p (supply) Where Q is quantity measured in pounds of scrap aluminum and p is price in cents. Price (1) Quantity Quantity Surplus (+) or Supplied (2) Demanded (3) Shortage (-) 4=2-3 $0.15 316,000 3,625 312,375 $0.16 315,900 3,700 312,200 $0.17 315,800 3,775 312,025 $0.18 315,700 3,850 311,850 $0.19 315,600 3,925 311,675 $0.20 315,500 4,000 311,500 P3.3 Demand analysis: The demand for housing is often described as being highly cyclical and very sensitive to housing prices and interest rates. Given these characteristics, describe the effect of each of the following in terms of whether it would increase or decrease the quantity demanded or the demand of housing. Moreover, when price is expressed as a function of quantity, indicate whether the effect of each of the following is an upward or downward movement along a given demand curve or involves an outward or inward shift I the relevant demand curve for housing. Explain your answers. A. An increase in housing prices: Quantity demanded would fall and is bound to grow negatively, the demand curve is bound to shift to the left B. A fall in interest rates: Quantity demanded is bound to grow positively whereas the demand curve is bound to shift to the right and thus remain as a negative slope even though there’s an increase in demand C. A rise in interest rates: Quantity demanded would fall and is bound to grow negatively, the demand curve is bound to shift to the left D. A sever economic recession:
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Managerial Economics – 6005 Chapter 3 Homework E. A robust economic expansion: Quantity demanded is bound to grow positively whereas the demand curve is bound to shift to the right and thus remain as a negative slope even though there’s an increase in demand
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mgnt_6005_chapter3[1] - Managerial Economics 6005 Chapter 3...

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