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5. Suppose Manitoba Hydro (the public corporation that provides natural gas to Manitobans) cuts in half the price of natural gas (a commonly used home heating fuel). a. What would be the impact on the market price and quantity of insulation (a construction] renovation material that reduces the amount of fuel required to heat a home)? Assume the market for insulation is perfectly competitive. (4 marks) ' Use a supply and demand graph to explain. Clearly label the price and quantity of insulation before and after the price increase of natural gas. Use words (compete sentences) to explain your graph. Page 6 of 9 ECON 1210 Assignment 1 - Fall 2020 Instructor: Jesse Hajer b. Suppose that the market for insulation was supplied by one company (a monopolist). Would our supply and demand curve analysis] framework still be valid? Briefly explain. (1 mark) 6. Suppose Shelly, a candidate running for Mayor, said the following: Not enough people are using the bus; many of our buses run half-empty. lfl am elected, i will reduce bus fares. This will get more people to ride the bus and total revenue from bus rides will increase. a. What is Shelly assuming about the elasticity of demand for bus transit? (1 mark) b. Let P1 equal the price of bus transit (bus fares) before the decrease in bus fares and P2 to the price of after the decrease. Which of the following graphs better represents the demand curve for bus transit envisioned by Shelly, Graph Aor Graph B? Explain your answer. (1 mark) Md\" OI b mum 02 Q! m Q' from! c. From the graph, how would you calculate the change in total revenue given a change in price (X refers to the darker shaded areas and W and Y refer to the lighter shaded areas)? (1 mark) d. If P1 = $4, P2 = 53, Q1 = 10,000, Q2 = 50,000, Q3 = 60,000 and Q4 = 80,000, calculate the change in total revenue in the case envisioned by Shelly. Show your work. (2 marks) Part E. (Total 8 marks) Answer % of the below questions (7 or 8) in Part E: 7. In September of 2018, a coalition of labour unions and anti-poverty activists launched a campaign calling on the Government of Manitoba to increase the minimum wage to $15 per hour. a. What are some of the reasons such groups or others might put fonvard for raising the minimum wage? (1 mark) b. Using a supply and demand diagram, illustrate the impact of an increasing in the minimum wage to $15 per hour on the market for low] unskilled labour. (4 marks) 1. Assume that the current minimum wage is so low that it is not binding, and that the market is currently in equilibrium at a wage of $12 per hour. ii. Clearly label the wage and quantity of labour supplied and demanded before and after the implementation of the $15 per hour minimum wage. iii. Use words (compete sentences) to explain your graph. c. In the simple supply and demand model, are more or less workers employed after the minimum wage increase? (1 mark) d. What does the supply and demand model used above assume with respect to competition and employer power over workers (due to for example, monopsony and the costs to workers associated with job search! loss)? (1 mark) e. If these assumptions (in part d) are violated, do your conclusions regarding employment (in part c) above still hold? Explain. (1 mark)
