1.Consider the following information:

A

B

C

D

Wheat

0

1

2

3

Rice

15

12

8

0

Draw the PPF from the above following data. What is the opportunity cost of Wheat in terms of ricefrom point B to pointC and C to D?

2. Using supply-and-demand diagrams, show the effect of the following events on the market for

sweatshirts.

a. A hurricane in South Carolina damages the cotton crop.

b. The price of leather jackets falls.

c. All colleges require morning exercise in appropriate attire.

d. New knitting machines are invented.

3. Answer the following questions on the basis of the following table

Point

Price of Oil

($)

Price of Car

($)

Demand for Car

('000)

A

105

500000

17

B

90

450000

25

C

85

380000

38

D

75

300000

55

a)Calculate price elasticity of demand for car from point A to Point B? Interpret your answer.

b)Calculate cross price elasticity of demand for car from point D to point A? Based on your answer identify whether the goods are complement or substitute.

c)Draw the car demand curve based on above data.

4. Define consumer surplus and producer surplus. Draw an appropriate diagram to show consumer surplus and producer surplus

5. Define elastic supply and inelastic supply with diagrams.