Managerial Economics – 6005
Chapter 3 Homework
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.
Surplus (+) or
Supplied (2) Demanded (3) Shortage (-)
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: