5 Econ 101 Questions

1.

Suppose a market consists of 10 buyers, each of whom is assumed to have the identical demand schedule given by: . Price Quantity Pomt ($ per unit) Demanded A $5 5 B $4 10 C $3 15 D 52 20 E $1 25 On the graph below, plot (drag and drop) the five points representing the market demand at each price. 100 150 200 250 300 Quantity Demanded As a recent graduate from the Finance Program, you are working in an investment firm responsible for predicting Canadian maple syrup prices in the commodities markets. For each of the following events, you have to advise your clients whether the event will: a. First cause a reaction from the buyers or the sellers of Canadian maple syrup b. Increase or decrease the demand or supply for Canadian maple syrup c. Shift the demand or supply curve right or left 0. Increase or decrease the equilibrium price of Canadian maple syrup d. Increase or decrease the equilibrium quantity of Canadian maple syrup Event: Health risks from eating Canadian maple syrup increase will be the first to react to this event so there will be a change for Canadian maple syrup. d) The equilibrium price of Canadian maple syrup will e) The equilibrium quantity will Review the varying degrees of the price elasticity of demand and the relation between elasticity and total revenue: 1. When demand is elastic: a. The percentage change in quantity :l the percentage change in price. b. This implies that when there is a decrease in price, total revenue will and when there is an increase in price, total revenue 2. When demand is inelastic: a. The percentage change in quantity :l the percentage change in price. b. This implies that when there is a decrease in price, total revenue will _ and when there is an increase in price, total revenue 3. When demand is of unitary elastic: a. The percentage change in quantity the percentage change in price. b. This implies that when there is a decrease or increase in price, total The graph below describes the current (original) market conditions in the frozen orange juice market. 160 140 120 100 Price per case B 20 40 60 80 Cases (Thousands of cases per week) Suppose the following two events happen at the same time in this market. Event 1: The price of a substitute product, apple juice, increases. Event 2: The number of firms supplying frozen orange juice decreases. Predict the combined effect of these two events on the equilibrium price and equilibrium quantity of frozen orange juice. Answer: Increase in the price of a substitute product, apple juice, will cause the for frozen orange juice to number of firms supplying frozen orange juice will cause the . A decrease in the to in supply will cause the equilibrium price to _ and the equilibrium quantity to _ . The combined effect of these two events are as follows: _ equilibrium price and :l equilibrium quantity. Refer to the graph below to answer the following question: At the market price of $8, the quantity demanded is + units and the quantity supplied is units. At this price exists. The market is in equilibrium at a price of $ 4 . In equilibrium, the quantity demanded by consumers is the quantity supplied by producers. 12- 11- S 10- 9- Price Price ($) Qd IQs D 10 20 30 40 50 60 70 80 90 100 Quantity (per week)