Question

Name: Jessica Villasenor

Date: June 14, 2020

Class: Principles of Microeconomics

Professor: Priti Verma

Assignment #4

1. Explain each of the following statements using supply-and-demand diagrams.

a. “When a cold snap hits Florida, the price of orange juice rises in supermarkets throughout the country.”

b. “When the weather turns warm in New England every summer, the price of hotel rooms in Caribbean resorts plummets.”

c. “When a war breaks out in the Middle East, the price of gasoline rises and the price of a used Cadillac falls.”

3. Consider the market for minivans. For each of the events listed here, identify which of the determinants of demand or supply are affected. Also indicate whether demand or supply increases or decreases. Then draw a diagram to show the effect on the price and quantity of minivans.

a. People decide to have more children.

b. A strike by steelworkers raises steel prices.

c. Engineers develop new automated machinery for the production of minivans.

d. The price of sports utility vehicles rises. e. A stock market crash lowers people’s wealth.

5. Over the past 40 years, technological advances have reduced the cost of computer chips. How do you think this has affected the market for computers? For computer software? For typewriters?

8. The market for pizza has the following demand and supply schedules:

Price	Quality Demand	Quantity Supplied
$4	135 Pizzas	26 Pizzas
5	104	53
6	81	81
7	63	98
8	53	110
9	39	121

a. Graph the demand and supply curves. What are the equilibrium price and quantity in this market?

b. If the actual price in this market were above the equilibrium price, what would drive the market toward the equilibrium?

c. If the actual price in this market were below the equilibrium price, what would drive the market toward the equilibrium?

11. Suppose that the price of basketball tickets at your college is determined by market forces. Currently, the demand and supply schedules are as follows:

Price	Quality Demand	Quantity Supplied
$4	10,000 Tickets	8,000 Tickets
8	8,000	8,000
12	6,000	8,000
16	4,000	8,000
20	2,000	8,000

a. Draw the demand and supply curves. What is unusual about this supply curve? Why might this be true?

b. What are the equilibrium price and quantity of tickets?

c. Your college plans to increase total enrollment next year by 5,000 students. The additional students will have the following demand schedule:

Price	Quantity Demand
$4	4,000 Tickets
8	3,000
12	2,000
16	1,000
20	0

Now add the old demand schedule and the demand schedule for the new students to calculate the new demand schedule for the entire college. What will be the new equilibrium price and quantity?

Answer 1

Ans- 1a) When cold snap hits florida , the supply of oranges decline because oranges thrive in warm temperatures. Thus supply of oranges decrease which increases its price and due to this price of orange juice also rise due to less supply of orange as both are compliments .

In the fig ,

supply : falls from S to S1

price : increases from P to P1.

Ans-1b)The price of hotel rooms in Caribbean resorts plummets/decrease in summer due to less demand of rooms. This shifts the demand curve backwards but the supply is constant thereby decreasing the price in summer.

In the fig ,

Demand : decreases from D to D1.

Price : decreases from D to D1.

Ans-1c) When war breaks out in MIDDLE-EAST , the supply of gasoline falls but demands is constant . Therefore it pulls the price up as shown in following figure.

In the Fig,

Supply : falls from S to S1.

Price : increases P to P1.

Cadillacs and gasoline are complimentary goods . As the price of gasoline rises, people will sell the used cadillacs in the market and this will increase its supply pushing down the price as shown in figure.

In the fig ,

Supply : increases from S to S1 .

pRICE : decreases from P to P1.