Supply and Demand - Economics 304K: Spring 2008 Problems...

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Economics 304K: Spring 2008 Helen Schneider Problems for Discussion I. The Market Forces of Supply and Demand 1. Consider the following two price-quantity schedules that describe the market for chocolate: P = Price of chocolate, in $ per pound and Q = Quantity of chocolate, in pounds. Schedule A Schedule B P Q P Q 16 0 16 8 14 1 14 7 12 2 12 6 10 3 10 5 8 4 8 4 6 5 6 3 4 6 4 2 2 7 2 1 0 8 0 0 a. Which schedule is the supply schedule, and which is the demand schedule? EXPLAIN. b. What is the equilibrium price and quantity in this market? (Draw a diagram illustrating the equilibrium.) c. Suppose the price is currently at $4 per pound. What problem would exist in this market? What would you expect to happen to price? Graphically illustrate your answer. d. Austin American-Statesman (Jan. 25, 2006, p. E3) reports that eating dark chocolate lowers the risk of heart disease. Indicate graphically and explain briefly how you predict this information will affect the market. 2.
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This note was uploaded on 04/08/2008 for the course ECON 304K taught by Professor Ledyard during the Spring '08 term at University of Texas at Austin.

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