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Unformatted text preview: supplied by Q S = 10 + 4P 4W, where P is the price of apples, Y is total consumers income and W is the wage rate. Suppose also that initially Y = 300 and W = 10. a) Draw the supply and demand curves and find the equilibrium price and quantity. b) Suppose now that Y goes up to 420. Find the new equilibrium price and quantity. c) Suppose that (in addition to the rise in income) the wage rises to 16. Find the new equilibrium price and quantity. d) The government is concerned that the price of apples is now too high and wants to maintain a price no higher than P = 30. Indicate various ways in which the government can achieve this. Key terms to review and understand: Substitutes; complements Ceteris paribus Elasticity Normal good Tax incidence Tariff...
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This note was uploaded on 03/15/2012 for the course EC 111 taught by Professor Timhatton during the Spring '12 term at Uni. Essex.
- Spring '12