Graph mary demand curve and bob demand curve

Assignment Help Microeconomics
Reference no: EM131019508

Homework 2-

1. Shift/Movements along Supply and Demand:

Assume there are a downward sloping demand curve and an upward sloping supply curve for DVD players.  Each of the statements will change this equilibrium point by shifting either the demand or supply curve. Explain what will happen to the equilibrium price and quantity in the market for DVDs if the following changes occur. Assume that there are no other changes in this market other than the stated change. 

a. Four manufacturers of DVD players close factories in the U.S.

b. Manufacturers have a new technology and thus the production cost for DVDs is reduced by 40%.

c. Recording artists demand a doubling of all royalties.

d. Napster, an internet file sharing company that allows people to share music/movie files, is allowed to operate. Access to Napster allows people to play music without possessing the DVD of that music.

e. The price of each DVD disc decreases.

2. Market Demand Curve:

Consider the market for chocolate. The market supply curve is given by Q=2P. Let Mary's demand curve for chocolate be Q=3-P and Bob's demand curve is Q=6-P. Suppose Mary and Bob are the only consumers of chocolate in this market.

a. Graph Mary's demand curve and Bob's demand curve on separate graphs.  Graph the market supply curve on each of the separate graphs.

b. Now on a new graph, graph the market demand curve for chocolate by horizontally summing Mary and Bob's demand curves.

c. According to question (b), what is the market demand function for chocolate?  (Hint: your market demand curve will be composed to two linear segments and therefore you will have two demand curves in your answer. You will need to specify the relevant quantity or price ranges for these two demand curves.)  What is the equilibrium price and quantity in the market for chocolate?

d. Now assume the market supply curve for chocolate shifts to the right by 2 units at every price. Write the equation for the new supply curve for chocolate and then find the new equilibrium price and quantity in the market for chocolate.

3. Comparative Advantage:

Analyze the following two countries. In one day in country A, it takes 24 workers to produce an airplane and 6 workers to produce a boat. In one day in country B, it takes 8 workers to produce an airplane and 4 workers to produce a boat. Both countries have 48 workers available each day.

a. Draw the PPF of each country for one day's worth of production. Use a separate graph for each country. In your graphs measure airplanes on the horizontal axis and boats on the vertical axis. Carefully label each graph with the respective country's name. Label the horizontal and vertical axis as well.

b. Answer the following questions.

What is the opportunity cost of producing an airplane in country A?

What is the opportunity cost of producing an airplane in country B?

What is the opportunity cost of producing a boat in country A?

What is the opportunity cost of producing a boat in country B?

c. Answer the following questions.

Which country has an absolute advantage in airplane production?

Which country has an absolute advantage in boat production?

Which country has a comparative advantage in producing airplanes?

Which country has a comparative advantage in producing boats?

d. Suppose the countries trade with each other.  Which country will export airplanes? And which country will export boats? What is the range of possible airplane prices (in terms of boat)?

e. Draw the combined PPF of these two countries in a graph with airplanes on the horizontal axis and boats on the vertical axis. (Hint: this is one you will have to think about a bit....start by imagining that both countries devote all of their resources to producing a single good. Then, ask the question what happens if we increase the production of the other good by one unit? And, if we increase the production of the other good by one unit, which country will produce this additional unit?)

4. Price Intervention:

Consider the potato market in Madison. The demand curve and supply curve are given by

Demand: Q = 6 - P,

Supply: Q = P + 2 ,

where the price of potatoes is given per pound and the quantity of potatoes is measured in pounds.

a. Draw a graph of the supply and demand curves in this market. Find the equilibrium price and quantity on this market.

b. Suppose the government sets the price ceiling at P = $4/lb. Find the new equilibrium price and quantity on this market and determine whether or not there is excess demand or excess supply.

c. Now, in an attempt to raise farmer revenue, the government implements a price support program with price floor at P = $3/lb. How many units of potatoes will be demanded by consumers with this price floor? How many units of potatoes will be supplied with this price floor?  At the price floor determine whether or not there is excess demand or excess supply in the market for potatoes.

d. Find the direct cost to the government for this support program described in part (c). In your graph shade the area that represents the direct cost. Suppose further that there is a storage cost of $2 per pound of potatoes purchased by the government. Find the total cost of the support program, including the storage cost.

e. Suppose the government decides to support this price floor using a subsidy program. There is no longer a cost for storage, and the guaranteed price equals the floor price, P = $3/lb. How many units of potatoes will be demanded by consumers with this subsidy program? How many units of potatoes will be supplied with this price subsidy program? What is the cost to the government for this subsidy program? In your graph shade the area that represents the cost to the government for this subsidy program and label this area clearly. What is the cost to consumers of this subsidy program? In your graph shade the area that represents the cost to consumers of this subsidy program and label this area clearly.  

5. Consumer Surplus and Producer Surplus:

237_Figure.png

Use the graph above to answer the following questions:

a. Which area(s) is (are) the consumer surplus before the price floor?

b. Which area(s) is (are) the producer surplus before the price floor?

c. Which area(s) is (are) the consumer surplus after the price floor?

d. Which area(s) is (are) the producer surplus after the price floor?

e. Which area(s) is (are) the deadweight loss after the price floor?

f. Which area(s) represent(s) the area of producer surplus transferred from the consumer surplus to the producer surplus after the imposition of the price floor?

Reference no: EM131019508

Questions Cloud

How might if affect the telling of the story : What effect does the epistolary structure of the novel have on the reader? How is letter-writing different from straight dialogue, and how might if affect the telling of the story?
Defines an abstract term whose definition is contested : Your task is to persuade your readers that the term is, in fact, contested, that defining it is important, and that your definition is reasonable.
Calculate the necessary length of hose via catenary formula : The hose is not to go below the elevation of the deck at y0=7 ft. I would like someone to calculate the necessary length of hose via catenary formula showing all steps with comments.
Find time constant and form of the complementary solution : Consider the circuit shown in Figure. Write the differential equation for i(t). Find the time constant and the form of the complementary solution.
Graph mary demand curve and bob demand curve : Consider the market for chocolate. The market supply curve is given by Q=2P. Let Mary's demand curve for chocolate be Q=3-P and Bob's demand curve is Q=6-P. Suppose Mary and Bob are the only consumers of chocolate in this market. Graph Mary's dema..
How would the team organize the department : Describe the organization of police agencies at the local, state, and federal level.
Find the form of the complementary solution : Consider the circuit shown in Figure in which the initial inductor current and capacitor voltage are both zero. Write the differential equation for vC(t).
How they are to behave in both the private and public forum : Avoid making "I" statements that are full of bluster and bravado, and do not summarize scenes from the film and/or the literature. Instead, I expect to see thoughtful, in-depth analysis in your writing.
Determine the time t0 at which the voltage crosses zero : The initial voltage across the capacitor shown in Figure is vC(0+) = 10V. Find an expression for the voltage across the capacitor as a function of time. Also, determine the time t0 at which the voltage crosses zero.

Reviews

Write a Review

 

Microeconomics Questions & Answers

  The two loops in the circular-flow diagram represent

The two loops in the circular-flow diagram represent the flow

  How many strategy profiles are there in game

How many strategy profiles are there in this game?

  Write the equation of the budget constraint

Draw Iron Mans budget constraint and optimal consumption bundles before and after the policy change. What would be the explanation for his increase in hours worked as a result of the policy change in terms of income and substitution effects?

  Explain consultation with the managers of the two lines

Sleak Teak builds yard furniture using domestic hardwoods and (in a smaller shop) knick-knacks form the same sort of wood. Although hardwoods were readily available in the past, recently they have become harder to obtain. Consultation with the man..

  Bob''s willingness to trade one good for the other

Suppose that Bob's indifference curves are perfectly L-shaped with the right angel occurring when Bob has equal amounts of both goods.  What does this imply about Bob's willingness to trade one good for the other? Give examples of goods where this ty..

  I area between line of equality and lorenz curve a is

lorenz curve graphs the cumulative percentage of income against the cumulative percentage of households. for questions

  Part 1 firm perspective1 use the following article and your

part 1 firm perspective1. use the following article and your own research to answer the following questionscompetitive

  Suppose that the government imposed a price floor on wages

Suppose that the government imposed a price floor on wages (minimum wage) in order to make sure that workers can earn a living wage. Is this a price floor? What are the economic implications of this action in the labour markets? Use graphs as require..

  Suppose that you desire to get a lump sum payment

Suppose that you desire to get a lump sum payment of $100,000 two years from now. Rounded to full dollars, how many current dollars will you have to invest today at a 10 percent interest to accomplish your goal?

  Correlated with gdp per capita

1.) Give an example of something that is correlated with GDP per capita where it is a clear priori that causation runs from GDP to that measure and not in the other direction?

  Calculate the expected welfare loss

Calculate the expected welfare loss, E(WL), from buying this policy. (HINT: the expected welfare loss is the sum of the areas of the two triangles times their probabilities.)

  What clarification do you need regarding the posting

What clarification do you need regarding the posting and what differences or similarities do you see between your posting and other classmates' postings?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd