Eco_1_Problem_Set_2_Akey

# Eco_1_Problem_Set_2_Akey - equilibrium price P the price...

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Eco 1 Spring 2008 Problem set 2 This problem set is due at the start of your recitation. Review your text – particularly Making the Connection 3.2 on page 83, before attempting these questions. - 1 ) Textbook question 4.7 on page 95. As below (you should have something like this): 2 ) Similarly show what we would expect to have observed in the market for ‘regular’ televisions. Also as below. Your graph should reflect the decline in demand for ‘regular’ televisions, as consumers substitute into the LCD market.

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Eco 1 Spring 2008 Problem set 2 3) Textbook problem 4.3 (page 94-95). The decline in the supply of “food” corn and the effect of increasing factor costs of Tortillas will appear as similar supply shifts in their respective markets:
Eco 1 Spring 2008 Problem set 2

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Eco 1 Spring 2008 Problem set 2 4 ) Suppose the government sets a price floor for milk that is above the competitive equilibrium price. a. Draw a graph showing this situation. Be sure that your graph shows the competitive
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Unformatted text preview: equilibrium price ( P* ), the price floor ( P f ), the quantity that would be sold in competitive equilibrium ( Q* ), and the quantity that is sold with the price floor ( Q f ). b. Compare the economic surplus when there is a price floor with the economic surplus in the market if/when there is no price floor. Use algebra to identify areas of the graph (see Figure 4.7 on page 107). Your answer should look something like this: The deadweight loss will be equal to ½(P f-P’)(Q*-Q f ). Eco 1 Spring 2008 Problem set 2 5) Textbook problem 3.18 on page 128. The price ceiling simply generates a shortage (I’ve considered the supply of kidneys to be fixed: since they are donated free, I can assume that they are fixed relative to “price”). Thus kidneys will have to be rationed some other way (lottery? Criminal record? Age?)...
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Eco_1_Problem_Set_2_Akey - equilibrium price P the price...

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