Exam 5: Using Supply and Demand

Fishing for king crabs for a living is risky business. Their migration habits along the Bering Strait are just not understood. The king crabs seem to disappear one year but return mysteriously a few years later, wreaking havoc on the income of crabbers. When crabs disappear, consumers buy lobster instead. What best describes this situation in the king crab market?

Quantity restrictions benefit which group the most?

Suppose caviar sales soars at the same time price increases. What would lead to both a higher quantity sold and higher price of caviar?

Demand for single occupancy apartments is Qd = 400,000 - 250P. Supply is given by Qs = 200,000 + 250P. Price of an apartment is measured in hundreds of dollars and quantity is measured in thousands of apartments. What is equilibrium rent and quantity of apartments rented?

The Katrina disaster in New Orleans decreased the ability of oil companies to purify crude oil into gasoline. This caused the:

The total demand for wheat in the U.S. is given by Qd = 1,750 − 130P. Domestic supply is given by, Qs = 1,000 + 170P. Price is measured in dollars/ton and quantity is measured in thousands of tons. The equilibrium price and quantity of wheat are:

Tariffs can be thought of as indirect:

What is a price ceiling? What happens to the relationship between quantity demanded and supplied with an effective price ceiling?

Start by drawing a supply and demand equilibrium situation.Using your diagram,demonstrate graphically and explain verbally the impact of a decrease in demand and an increase in supply on equilibrium price and quantity.

The most likely impact of an effective price floor is:

The minimum wage is an example of a price floor.

Suppose that initially, the equations for demand and supply are Qd = 48 − 4P and Qs = 4P − 16, respectively. If the quantity supplied decreases by 4 at every price (so that the supply curve shifts to the left), the equilibrium price will change from:

Refer to the graph shown that depicts a third-party payer market for prescription drugs. If the co-payment is $2 per pill, what will be the quantity demanded?

Used newspaper often is recycled into building insulation,packaging materials,and other products.At one time there was a "glut" of used newspaper in the United States.As a result,recycling centers refused to pay for used newspaper anymore,even though the price of used newspaper used to be about $.02 per pound.(Recycling centers continue to take used newspaper,without payment,from environmentally conscious consumers. )The "glut" also caused consumers to throw out large quantities of used newspaper in their trash,where it ended up in landfills.Since these landfills were becoming costly to build and maintain,local governments began seeking ways to encourage recycling and reduce the amount of used newspaper that ended up in landfills.Your task is to analyze this problem in the context of the following numerical example. Suppose the market for used newspaper can be described by the following equations: Q_D = 600 - 10P Q_S = 900 Where Q_D is the quantity of used newspaper demanded by recycling centers.All prices are measured in cents per hundred pounds and all quantities are measured in pounds. (a)Compute the initial equilibrium price (P₁)and quantity (Q₁)of used newspaper.Then identify how much used newspaper gets recycled and how much ends up in landfills.Is there a "glut" of used newspaper? Explain your answers briefly. (b)Suppose the U.S.government required all newspaper publishers to purchase 25 percent of their newsprint from recycled newspaper.Suppose also that this requirement shifted the demand curve for used newspaper to either Q_D = 400 - 10P or Q_D = 1200 - 10P.Which demand curve would result from the 25 per cent recycling requirement? (c)Based on your answer in (b),compute the new equilibrium price (P₂)and quantity (Q₂)of used newspaper.Now how much used newspaper gets recycled and how much ends up in landfills? (d)Would the 25 per cent requirement help eliminate the alleged "glut" of used newspaper in the United States? Explain briefly with reference to your answers in (c). (e)Draw an appropriate graph of your solutions in (a)and (c).

Refer to the graph shown. If sellers receive a price of $15, quantity supplied will equal:

The standard supply/demand framework:

If government were to issue a fixed number of licenses to produce a good or provide a service, this would likely:

At a Chicago Bulls game 20,000 tickets were sold at $30 apiece. The game was sold out and some people did not get tickets. This suggests that the selling price:

Taxi medallions were issued in New York City to:

What is a tariff? Demonstrate the effect of a tariff on equilibrium quantity and price.Does the equilibrium price rise by the amount of the tariff? Why or why not?