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1) suppose an industry-wide survey resulted in the demand and supply schedules for country-music CD's presented in

this table


P Qp (Millions) Qs (Millions).

$9 100 40

$10 90 60

$11 80 80

$12 70 100

$13 60 120


a) Graphically illustrate the market for country-music CS's. Label all necessary items in your graph.

b) what is the equilibrium quality in this market?

c) if the industry price was $9

  • would there be a shortage, surplus or neither?
  • if shortage or surplus, how much?
  • If a shortage or surplus, what would happen to the price and why? explain.

d) if the industry price was $13:

  • would there be a shortage, surplus or neither?
  • if shortage or surplus, how much?
  • if a shortage or surplus, what would happen to the price and why? explain.




2) consider the market for corn chips. how would each of the following events (A-D separately) affect the market (what is the effect on supply, demand, equilibrium price and equilibrium quantity? drawing each out.


a) a technology for producing corn chips is adopted by corn chip producers, decreasing the cost of producing corn chips.

b) a recession causes the income of buyers of corn chips (an interior good) to decrease.

c) the price of potato chips (a substitute) declines drastically.

d) a new study finds that consumption of corn chips might be related to diabetes, and at the same time, the price of corn (an input) increases.

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