1.Market research has revealed the following information about the market for chocolate bars: The demand schedule can be represented by the equation QD = 1,600 - 300P, where QD is the quantity demanded and P is the price. The supply schedule can be represented by the equation QS = 1,400 + 700P, where QS is the quantity supplied. Calculate the equilibrium price and quantity in the market for chocolate bars.

2.Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston:

Price

Quantity Demanded (Business Travelers)

Quantity Demanded (vacationers)

$150

2100

1000

200

2000

800

250

1900

600

300

1800

400

a.As the price of tickets rises from $200 to $250, what is the price elasticity of demand for (i) business travelers and (ii) vacationers? (Use the midpoint method in your

calculations.)

b.Why might vacationers have a different elasticity from business travelers?

3.Suppose that your demand schedule for compact discs is as follows:

Price

Quantity Demanded (Income=$10,000)

Quantity Demanded (Income=$12,000)

8

40 CD's

50 CD's

10

32

45

12

24

30

14

16

20

16

8

12

a.Use the midpoint method to calculate your price elasticity of demand as the price of compact discs increases from $8 to $10 if (i) your income is $10,000 and (ii) your income is $12,000.

b.Calculate your income elasticity of demand as your income increases from $10,000 to $12,000 if (i) the price is $12 and (ii) the price is $16.

4.Melissa buys an iPod for $120 and gets consumer surplus of $80.

a)What is her willingness to pay?

b)If she had bought the iPod on sale for $90, what would her consumer surplus have

c)been?

d)If the price of an iPod were $250, what would her consumer surplus have been?

5.The supply and demand for broccoli are described by the following equations:

Supply: QS = 4P - 80

Demand: QD = 100 - 2P.

Q is in bushels, and P is in dollars per bushel.

a)Graph the supply curve and the demand curve. What is the equilibrium price and quantity?

b)Calculate consumer surplus, producer surplus, and total surplus at the equilibrium.

c)If a dictator who hated broccoli were to ban the vegetable, who would bear the larger burdenthe buyers or sellers of broccoli?

6.Kawmin is a small country that produces and consumes jelly beans. The world price of jelly beans is $10 per bag, and Kawmin's domestic demand and supply for jelly beans are governed by the following equations:

Demand: QD = 8 - P

Supply: QS = P,

where P is in dollars per bag and Q is in bags of jelly beans.

a.Calculate the following (recalling that the area of a triangle is 12 ~ base ~ height): the equilibrium price and quantity, consumer surplus, producer surplus, and total surplus.

b.Calculate the equilibrium price, quantities of consumption and production, imports, consumer surplus, producer surplus, and total surplus.

c.After a while, the Czar of Kawmin responds to the pleas of jelly bean producers by placing a $1 per bag tariff on jelly bean imports. Calculate the equilibrium price, quantities of consumption and production, imports, consumer surplus, producer surplus, government revenue, and total surplus.