a. Using the data in the tables below, graph on the grid the demand and supply curves for milk, assuming that all factors other than the price of milk are held constant. Connect adjacent data points with straight line segments. Label the demand curve "DD" and the supply curve "SS".
The equilibrium price of milk is:
The equilibrium quantity of milk is:
b. News flash: "New study shows milk causes baldness in mice." Suppose the consumers' reaction is that at each price the quantity they are willing to buy falls by 4 gallons. Draw the new demand curve, and label it "D'D'".
The new equilibrium price is:
The new equilibrium quantity is:
c. News flash: "Congress passes calcium tax of $3 per gallon of milk."
Putting the buyer price on the vertical axis, graph the new supply curve on the axes above. Label it "S'S'".Assuming that D'D' is still the demand curve, the new buyer price is:
The new seller price is: _____
The equilibrium quantity is now how many gallons?
Compared to (b), how much of the tax is paid by the buyer?
How much of the tax is paid by the seller? _____