1) Suppose the demand and supply curves for eggs in the United States are given
ID: 1188013 • Letter: 1
Question
1)
Suppose the demand and supply curves for eggs in the United
States are given by the following equations:
Qd = 100 - 20P
Qs = 10 + 40P
where Qd = millions of dozens of eggs Americans would like to
buy each year; Qs = millions of dozens of eggs U.S. farms
would like to sell each year; and P = price per dozen of eggs.
Fill in the following table:
Price Quantity Quantity
( Per Dozen) Demanded (Qd) Supplied (Qs)
$ .50
$ 1.00
$ 1.50
$ 2.00
$ 2.50
2) Kamika lives in Chicago but goes to school in Tucson, Arizona.
For the last 2 years, she has made four trips home each year.
During 2010, the price of a round-trip ticket from Chicago to
Tucson increased from $350 to $600. As a result, Kamika
decided not to buy a new outfit that year and decided not to
, drive to Phoenix with friends for an expensive rock concert.
a. Explain how Kamika's demand for clothing and concert tickets can be affected by an increase in air travel prices.
b. By using this example, explain why both income and substitution effects might be expected to reduce Kamika s number
of trips home.
3) For each of the following products, explain whether demand is likely to be elastic or inelastic.
A) Cigarettes
B) Tacos
C) Gasoline
D) Milk
4 ) Explain which of the following is a fixed cost or a variable cost
for Southwest Airlines.
a. The cost of jet fuel used in its airplanes.
b. The monthly rent on its Dallas, Texas headquarters.
c. The yearly lease payments on its current inventory of
Boeing 737 jets.
d. The cost of peanuts it serves to passengers.
5) Which of the following indistries do you think are likely to exhibit large economies of scale? explain why in each case
a) Home building
b) Electric pwer generator
c) Vegetable farming
d) Software development
e) Aircraft manufacturing
1)
Suppose the demand and supply curves for eggs in the United
States are given by the following equations:
Qd = 100 - 20P
Qs = 10 + 40P
where Qd = millions of dozens of eggs Americans would like to
buy each year; Qs = millions of dozens of eggs U.S. farms
would like to sell each year; and P = price per dozen of eggs.
Fill in the following table:
Price Quantity Quantity
( Per Dozen) Demanded (Qd) Supplied (Qs)
$ .50
$ 1.00
$ 1.50
$ 2.00
$ 2.50
2) Kamika lives in Chicago but goes to school in Tucson, Arizona.
For the last 2 years, she has made four trips home each year.
During 2010, the price of a round-trip ticket from Chicago to
Tucson increased from $350 to $600. As a result, Kamika
decided not to buy a new outfit that year and decided not to
, drive to Phoenix with friends for an expensive rock concert.
a. Explain how Kamika's demand for clothing and concert tickets can be affected by an increase in air travel prices.
b. By using this example, explain why both income and substitution effects might be expected to reduce Kamika s number
of trips home.
3) For each of the following products, explain whether demand is likely to be elastic or inelastic.
A) Cigarettes
B) Tacos
C) Gasoline
D) Milk
4 ) Explain which of the following is a fixed cost or a variable cost
for Southwest Airlines.
a. The cost of jet fuel used in its airplanes.
b. The monthly rent on its Dallas, Texas headquarters.
c. The yearly lease payments on its current inventory of
Boeing 737 jets.
d. The cost of peanuts it serves to passengers.
5) Which of the following indistries do you think are likely to exhibit large economies of scale? explain why in each case
a) Home building
b) Electric pwer generator
c) Vegetable farming
d) Software development
e) Aircraft manufacturing
Explanation / Answer
To find the Quantity Demanded, use the formula
Qd = 100 - 20P
P stands for Price, which is given to you in the chart.
All you need to do is substitute it in the equation. Let's do the first one:
Qd = 100 - 20P
= 100 - 20(0.50)
= 100 - 10
= 90
So the Quantity Demanded is 90 for the first blank.
Keep going until you've solved for $2.50.
______________________________________…
Then do the same for Quantity Supplied.
The equation is Qs = 10 + 40P. Substitute the price for P.
So again, the first one is
Qs = 10 + 40P
= 10 + 40(0.50)
= 10 + 20
= 30
So you put 30 in the first blank under Quantity Supplied.
Now keep subbing in the prices into the equation
____________________________
The equilibrium price is when there are no shortages or surpluses. All this means is, when does Quantity Demanded equal Quantity Supplied? Or, when are the numbers the same? Once you find that, look at the price. That price is at equilibrium.
Hope this helped! Good luck.
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