1.Consider the market for candy. Supply of candy: QS= 20P + 300Demand for candy QD= -40P + 1,200

1a. Calculate the equilibrium price and quantity of candy.

1b. If a fire causes the production of candy to fall by 200, calculate the new equilibrium price and quantity of candy. Explain your answer.

2. Ken collects desks and chairs. If Ken buys 1 desk (D) he must have 4 chairs (C).The price of a desk is $100 and the price of the five chairs is $20.His income is $5,400. Solve for Ken's budget constraint, utility function, and calculate using the theory from class how many desks and chairs Ken will buy.

3.Alice can use tea (T) and/or coffee (C) for work.Her income is $72.The price of a tea is $6 and the price of coffee is $12.Her utility function is U(P,M) = 3T + 4C

3a. Write down Alices's budget constraint and calculate how many cups of coffee and tea Alice will buy.Explain your answer.

3b. If the price of tea increases to $8 but the price of coffee is $12, calculate how many cups of coffee and tea Alice will buy.Explain your answer.

4. April buys apples, oranges and other goods. You don't need to draw in on the graph.

4a. Explain the effect of a decrease in the price of apples.

4b. Explain the effect of an increase in the price of oranges.

5a. The price of chicken in January is $3 and 12 pounds are purchased. The price of chicken in December is $6 and 11 pounds are purchased. Calculate the own price elasticity of demand. Explain to the delivery person so that they can understand if the demand for chicken is elastic or inelastic.

5b. The price of beef in May is $4.0 per pound and falls to $3.5 in July. The quantity of chicken consumed in May is 4,000 pounds and falls in July to 3,800 pounds. Calculate the cross price elasticity of demand. Explain to the delivery person so that they can understand if beef and chicken are substitutes or complements.

5c. A coffee cup costs $12 and people buy 5 coffee cups.The price elasticity of demand for coffee cup is -0.8.If the firm increases the price of a coffee cup by 5%, calculate the change in total expenditure.Explain your answer so that the person selling coffee would understand.