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PS3_S - 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 Total Price Quantity Supplied (Per Week) Quantity Supplied (Per Week) Quantity Supplied (Per Week) Market Supply (Per Week) \$5.00 25 30 20 75 5.50 30 40 25 95 5.75 35 50 30 115 6.00 40 60 35 135 6.25 45 70 40 155 Market supply curve can be reached by horizantal summation of quantity supplied of all of the firms at each price level. 0 1 2 3 4 5 6 7 0 50 100 150 200 Price quantity supplied Market Supply Series1

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2 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. Demand for hamburger decreases. Demand curve shifts to the left. Equilibrium price and quantity decreases. b) A surgeon general warns that hamburger increases cholesterol and causes heart-attacks. Demand for hamburger decreases. Demand curve shifts to the left. Equilibrium price and quantity decreases. c) Because of the shortage of potateos, which are complements to hamburgers, the price of French Fries increases. Price of a complementary good increases. Demand for hamburger decreases. Equilibrium price decreases, equilibrium quantity decreases. d) Price of the fried chicken which is a substitutes for hamburger increases. Demand for hamburger increases. Demand curve shifts to the right. Equilibrium price and quantity increases.
3 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. We need to calculate the quantities demanded that corresponds to the prices are: 0.3*25000=7500, 0.5*25000=12500, 0.75*25000=18750, 0.9*25000=22500, 25000 So, the demand schedule is Q d P (TL) 7500 20 12500 15 18750 10 22500 5 25000 1 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 0 5 10 15 20 25 7500 12500 18750 22500 25000 price quantity

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4 willingness to pay, what would be the equilibrium price of the concert ticket? Show the result on your graph. S=D = 12500,
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PS3_S - METU Department of Economics Econ 101 Introduction...

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