3. Supply and Demand Schedules for a Gallon of Milk (33 points) Price Quantity Supplied Quantity Demanded $3.00 120000 180000 $3.50 160000 160000 $4.00 200000 140000 $4.50 240000 120000 $5.00 280000 100000 Complete parts a, b, c, d, and e and either parts f and & OR parts h and i. a. Graph the supply and demand schedules in a supply curve and demand curve, respectively, on the same graph. b. What are the equilibrium price and quantity? c. Solve for the total revenue at the point of equilibrium. d. Determine the price elasticity of demand between the prices of $3.50 and $4.00. e. State whether the value you obtained in part d reveals the gallon of milk to be elastic, inelastic, or unit elastic. Complete either parts f and & together OR parts h and i together. f. If the price for all brands of cookies (a complement good) were to decrease, show what will happen on your graph for the gallons of milk. Label what you did as C and explain why you shifted the curve that you did. Note that only one of the two curves will shift. At the price of $5.00, determine whether there exists a shortage or surplus of the gallon of milk in the market and state the size of this shortage or surplus. h. If the government instituted subsidies to milk producers to provide their milk in more ways to more customers, show what will happen on your graph for the gallon of milk. Label what you did as S and explain why you shifted the curve that you did. Note that only one of the two curves will shift. i If the government intervened in the milk market and stated that the price must be set at $5.00, would this be an example of them imposing a price ceiling or a price floor in order to impact the market as a price control is intended to do? Explain. 4. Elasticity (4 points) Complete either part a or part b. a. When a firm finds that the demand for its product is elastic, what should it do to the price of the product? Should it lower the price, raise the price, or keep it the same? Explain. b. Would the cross price elasticity of demand between the milk and cookies as introduced in question 3 be positive, negative, or zero? Explain why. L O O