Homework#2_Fall2011

Homework#2_Fall2011 - What is the size of any surplus or...

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195.603 Applied Microeconomics Professor: Carey Borkoski, Ph.D. Homework #2 – Due September 7 th Complete the following problems on a separate sheet(s) of paper. (40 points) 1. The market for bicycles has the following demand and supply schedules: Price Q D Q S $100 70 30 200 60 40 300 50 50 400 40 60 500 30 70 600 20 80 a. Graph the demand and supply curves. (2 points) b. What is the equilibrium price and quantity in this market? (2 points) c. If the market price were $100, would there be a surplus or shortage?
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Unformatted text preview: What is the size of any surplus or shortage? Will this cause prices to rise, fall or stay the same? (2 points) d. Explain the process that would drive the market toward equilibrium. (3 points) e. If the price of bicycle helmets declined, explain what would happen in the market for bicycles. (1 point) 2. Complete the following textbook problems: pp 90-91, problems 1, 3 and 7. (10 points each)...
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