Could you complete the following questions and graphs.
QUESTION 4 (10 Marks) Consider the effects of each event outlined in the following table on the market for orange juice in Canada. Place a (T), (4) or (-) under the appropriate heading to indicate whether there will be an increase, decrease, or no change in demand (D), supply (S), equilibrium price (P) and quantity traded (Q). Assume orange juice is a normal good. D S P Q a) Medical research indicates that orange juice can cure baldness ) There is a significant increase in the price of oranges. c) An increase in income taxes reduces the after-tax income of Canadians d) An improved method of juicing is introduced in the industry e) The price of apple juice increases dramatically QUESTION 5 (10 Marks) The demand and supply curves for an economy are: P =700 - 10QD (Demand) P = 400 + 5QS (Supply)- a) Rewrite the equations above as a function of price. b) If the price is $10 then the quantity demanded is and the quantity supplied is . At a price of $10 there is a (surplus/shortage) in the amount of c) At market equilibrium, the equilibrium quantity is and the equilibrium price is Page 7 of 7QUESTION 2 (5 Marks) The figure below shows the market for cinnamon toast lattes. Price De -D1 Quantity These lattes were introduced last year but only in recent months is everyone mentioning how amazing they are. In fact, some people who never even drank coffee are now drinking two or three of these lattes a day! At the same time countries that grow cinnamon have experienced a significant drought resulting in a significant decline in their ability to produce cinnamon compared to last year. Assume that S1 and D1 characterize the initial equilibrium - before the lattes were introduced. What combination of curves best corresponds to the market situation after the lattes have been introduced? (indicate the labels of the two curves e.g. D1; $3) D ; S . N Compared to the original equilibrium the price has [increased or decreased? ] and the quantity has_ [increased or decreased?] Page 6 of 7QUESTION 3 (15 Marks) Following are the demand and supply schedules for fradistats in January of 2017: Quantity Demanded Quantity Supplied Price (Jan 2017) Quantity Supplied (Jan 2017) (Jan 2018) $7 20 80 $6 30 75 $5 40 70 $4 50 65 $3 60 60 $2 70 55 a) Plot the demand and supply curves for January 2017 in the grid below: 4 Price $8 $7 $6 $5 $4 $3 $2 $1 so 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 Quantity N b) The equilibrium price is and the equilibrium quantity is 2 c) Suppose that the government sets the price to $5.00 per fradistat. As a result, there would be a (surplus/shortageeither) valued at $ Show this on the diagram. d) Now suppose input costs have increased substantially in January 2018. As a result, it causes the supply to fall by 45 units. Fill in the fourth column in the table above and plot the new supply curve. 3 e) Assuming the price floor remains in place, there is now a (surplus/shortageeither) valued at $ (Note: the price floor remains in place at $5.) Page 5 of 7
