Question

1. Given: Suppose you are given the following market demand function for electric cars: QD = I − P where P is the price per unit of electric cars and I is consumer income. And given the market supply function for electric cars: QS = 4*P − 10*w where P is the price per unit of electric cars, w is the hourly wage rate the firm pays to workers.

Suppose, as a baseline, I = 50000 and w = 500. Find the equilibrium price of electric cars?

A. 8500

B. 11000

C. 18000

D. 21000

2. Given: Suppose you are given the following market demand function for electric cars: QD = I − P where P is the price per unit of electric cars and I is consumer income. And given the market supply function for electric cars: QS = 4*P − 10*w where P is the price per unit of electric cars, w is the hourly wage rate the firm pays to workers.

Suppose, as a baseline, I = 50000 and w = 500. Find the equilibrium quantity of electric cars?

A. 57000

B. 42000

C. 39000

D. 32000

3. Given: Suppose you are given the following market demand function for electric cars: QD = I − P where P is the price per unit of electric cars and I is consumer income. And given the market supply function for electric cars: QS = 4*P − 10*w where P is the price per unit of electric cars, w is the hourly wage rate the firm pays to workers.

Suppose, as a new event, w = 4000, but everything else is unchanged (so I = 50000). Find the new equilibrium price of electric cars?

A. 8500

B. 11000

C. 18000

D. 20000

4. Given: Suppose you are given the following market demand function for electric cars: QD = I − P where P is the price per unit of electric cars and I is consumer income. And given the market supply function for electric cars: QS = 4*P − 10*w where P is the price per unit of apples, w is the hourly wage rate the firm pays to workers.

Suppose, as a new event, w = 4000, but everything else is unchanged (so I = 50000). Find the new equilibrium quantity of electric cars?

A. 57000

B. 42000

C. 39000

D. 32000

5. Given: Suppose you are given the following market demand function for electric cars: QD = I − P where P is the price per unit of electric cars and I is consumer income. And given the market supply function for electric cars: QS = 4*P − 10*w where P is the price per unit of electric cars, w is the hourly wage rate the firm pays to workers.

Recall the following:

• Baseline Conditions: I = 50000 and w = 500.

• New Conditions: w = 4000, but everything else is unchanged (so I = 50000).

Comparing the new equilibrium versus the baseline equilibrium, explain economically what happened?

A. The wage rate to workers increased, causing a decrease in supply which increased the equilibrium price and decreased the equilibrium quantity.

B. Consumer income increased, causing demand to decrease which decreased both the equilibrium price and equilibrium quantity.

C. The wage rate to workers increased, causing an increase in supply which increased the equilibrium price and decreased the equilibrium quantity.

D. Consumer income increased, causing demand to increase which increased both the equilibrium price and equilibrium quantity.

Answer 1