Then show the effect on the price and quantity of steaks a More people become

Then show the effect on the price and quantity of

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determinants of demand or supply is increased or decreased. Then show the effect on the price and quantity of steaks. a) More people become vegan b) The price for chicken breasts increases by 25% c) The price of cow feed has doubled and the economy enters a recession

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Dede Huang ECON 1001 B 4. Suppose Market Demand: Qd = 200 – 3P and Market Supply: Qs = 4P + 100. If price increases from \$20 to \$40, what is the price elasticity of demand? 5. When the local used bookstore prices economics books at \$15 each, they generally sell 70 per month. If they lower the price to \$7 each, they sell 90. Given this, what is the elasticity of demand for economic books, and what action should the store take? 6. Refer to the following graph and consider if minimum wage was increased to \$25 a) Explain why this is a either a binding or non-binding price floor. b) Explain whether this creates a surplus or shortage in the supply labour in the economy. 7. Assume the demand for gas is relatively inelastic and the supply of gas is relatively elastic. a) If the government imposes a \$1 tax per liter, draw a diagram to show the effect on consumer surplus and producer surplus. b) Do consumers or producers suffer the bigger loss? 8. Explain, with the aid of two diagrams (one with an elastic demand curve, and one with an inelastic demand curve) how elasticity of demand affects: the burden of a tax between buyers and sellers; the amount of tax revenue the government gets; the deadweight loss of taxation.

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