aggregate demand curve. What is the market consumer surplus when the equilibrium price is
$2? Explain!
4. (a) (5 points) Draw the linear demand curve
q
d
= 10

p
.
(b) (5 points) Is the elasticity of the demand curve constant? Please explain why or why not.
(c) (5 points) * If it is constant, what is the value? If it is NOT constant, label the portion of
the graph where elasticity is larger and the portion where elasticity is smaller and explain
why.
5. Suppose the supply curve for apples in Binghamton is given by
q
S
= 3
p
and the demand curve
is given by
q
D
= 20

p
.
(a) (5 points) Illustrate the supply and demand curve in a standard graph. Label each curve,
x and y axis, the curves, equilibrium point, CS area, PS area and intercept.
(b) (10 points) What is the market price and quantity in this market?
(c) (10 points) ** If there were a tax levied on this market, would demanders or suppliers
bear more of the burden of the tax? How do you know?
6.
Price ﬂoors.
(a) (5 points) * What is a price ﬂoor? Please provide an explanation, graphical illustration
and an example of a price ﬂoor in the real world.
(b) (5 points) ** What does it mean for a price ﬂoor to be binding? Does a binding price
ﬂoor result in shortage or surplus or neither? What about a nonbinding price ﬂoor?
7. (10 points) ** The New York State sales tax if 4% and I estimate that there were approximately
100 billion dollars of sales in NY state. This means that New York State collected 4 billion
dollars from producers and consumers in New York State. True or False, and
Justify
: An
economist would say that 4 billion dollars in damages were inﬂicted on producers and consumers
in New York State.
8. (10 points) *** Type A SUVs are manufactured on a car body, and so the same factories can
be used to make type A SUVs or cars. Type B SUVs factories cannot be used to manufacture
any other vehicle other than Type B SUVs. When the demand for cars rises, what is the eﬀect
on the price and quantity sold of Type B SUVs?
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 Spring '08
 AndreasPape
 Supply And Demand, Somalia, new york state

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