PS3 - METU Department of Economics Econ 101: Introduction...

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1 METU Department of Economics Econ 101: Introduction to Economics I Sections 01-02-03 Fall 2011 PROBLEM SET 3 PART A: PROBLEMS Q-1) Suppose the pizza industry is made up of three firms: The Mark Company, Mike, Inc., and Bill Enterprises. Use the information in the following table to construct the market supply curve for pizzas. Mark Mike Bill Price Quantity Supplied (Per Week) Quantity Supplied (Per Week) Quantity Supplied (Per Week) $5.00 25 30 20 5.50 30 40 25 5.75 35 50 30 6.00 40 60 35 6.25 45 70 40 Q-2) State that how each of the following events will effect the market for hamburgers. Draw graphs to illustrate the effect. a) The price of pizzas which is a substitute for hamburger declines. b) A surgeon general warns that hamburger increases cholesterol and causes heart-attacks. c) Because of the shortage of potateos, which are complements to hamburgers, the price of French Fries increases. d) Price of the fried chicken which is a substitutes for hamburger increases. Q-3) Suppose that the Moğollar will give a concert to the METU Students in METU Studium in the forthcoming days. METU has approximately 25000 students. The percentage distribution of all METU Students in terms of the demand for the concert ticket is as follows: 30 % of the students are willing to pay 20 TL or more 50 % of the students are willing to pay 15 TL 75 % of the students are willing to pay 10 TL 90 % of the students are willing to pay 5 TL 100 % of the students are willing to pay 1 TL a) Derive the demand schedule.
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2 b) Carefully draw the demand curve. c) 25000 students want to go to the concert. However, only 12500 concert ticket will be sold due to the capacity constraint of the stadium. If the ticket sales are based on willingness to pay, what would be the equilibrium price of the concert ticket? Show the result on your graph. d) If the university administration intervenes to the price in the way that ticket price cannot go above 10 TL, is this a price ceiling or a price floor? What will be the quantity exchanged at new price? Will there be an excess supply or excess demand in the market? Show this on your graph. e) How can this quantity exchanged be allocated? Q-4) Suppose that the following equations of market demand and supply are given: Q D = 45 – 2P Q S = P – 15 a) Fill in the following table and find the equilibrium price and quantity Price Quantity Supplied Quantity Demanded $15.00 $16.00 $18.00 $19.00 $20.00 b) Draw supply and demand curves carefully and show the equilibrium point. c) What are the consumer and producer surpluses at the equilibrium price? Assume that government impose a price ceiling at $18, d) Will there be excess supply or excess demand in the market? Illustrate on the graph.
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PS3 - METU Department of Economics Econ 101: Introduction...

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