1.With reference to the Supply and Demand curves, what might happen to the equilibrium price and quantity of MacBooks if the price of silicon (which goes into the production of microchips) were to increase; while, at the same time, the price of PC laptops (a substitute for MacBooks) also increased?

2.Explain the role of price as a mechanism for allocating resources in an economy.

3.What would happen if, in order to provide lower cost health care, the government decided to set a price ceiling (Pmax) in the health insurance market?

a)What is the effect of this maximum price legislation on the market for health insurance?

b)Briefly explain the situation for both consumers and producers (i.e. health care providers).

c)What might the government do to achieve their intended aims (i.e. lower costs and increased quantity)?

4.Calculate the Price Elasticity of Demand (PED) for diamond rings if there is a price increase from $10,000 to $12,000 and quantity demanded falls from 100,000 to 90,000. Does this answer support what we have learned about elasticity and what we might expect for diamond rings? If so, why? Use a Diagram

5.Is a price increase typically a good decision for producers in such a market (i.e. diamond rings)? If so, why?

6.Briefly explain why Cross Elasticity of Demand (XED) is important for business decision-making.

7.Briefly explain why it usually makes sense for the government to impose taxes on markets (and products) that have an inelastic demand instead of markets with an elastic demand.