1.John's income has just increased by $10,000 per year.If a Ramen noodle is an inferior good in John's opinion, what will happen to his demand for Ramen noodles?Show your answer using a well labeled graph.

2.Show graphically (in two separate graphs for each part) the effects of an increase in the price of peanut butter on the demand for peanut butter and on the demand for jelly when

a)peanut butter and jelly are complements

b)peanut butter and jelly are substitutes

3.Discuss how each of the following will affect the supply of sugar.

a)Technological change.

b)A change in input prices.

c)A change in the market price of the good.

d)A change in the number of firms in the market.

4.For each of the following draw well labeled graphs that illustrates the likely effect on the MARKET for EGGS. Indicate in each case the impact on equilibrium quantity (Q*) and equilibrium price (P*) for eggs.

a)A surgeon warning that high cholesterol foods can cause heart attacks.

b)A decrease in the price of bacon.

c)An increase in the price of chicken feed

d)Caesar salads become trendy at dinner parties and the salad dressing is made from raw eggs.

e)A technological innovation that reduces egg breakage during packing.

5.The demand and supply curves for No.2 pencils in Sahara can be described by the following equations :DemandQd= 100-20PSupplyQs=10+40P

a)Complete a demand schedule and a supply schedule based on the following prices $0.5, $1, $1.50, $2.0 and $2.50.

b)Identify the equilibrium price and quantity for pencils

c)Using the above data plot the information on a well labeled diagram, identify on the graph the equilibrium by writing an E

d)Is the equilibrium price and quantity the same as found in (b)?

e)Calculate the excess supply or demand when P=$2.00 and show this point on the graph

f)Compute the shortage or surplus when P=$0.50 and show this point on the graph

g)Suppose that last month the price of pencils fell but the quantity sold of pencils has increased. Use supply and demand analysis to explain how these changes could have occurred.

h)Binlead a substitute lead pencil has increased its price; show on the diagram how this would affect the equilibrium price and quantity of No.2 pencils.

6.Given that the demand and supply curves for No.2 pencils is Qd= 100-20P and Qs=10+40P respectively.

a)Derive the inverse demand and supply function for No.2 pencils.

b)Solve algebraically using the equation the equilibrium price and quantity.

c)Calculate the consumer surplus.

d)Determine the price that will result in an excess supply of 4 pencils.