ECONOMICS 101 Problem Session #2 May 2024 Price 4 Quantity Demanded 7 10 13 16 etc 48 Quantity Supplied 39 30 21 12 etc 20 32 44 56 68 etc A. 1. What is the equation for the demand curve (Q=f(P)? 2. What is the quantity demanded when P=57 3. What is the value of what is produced when the quantity demanded is 27? 4. What is the equation for the supply curve (Q=f(P)? 5. What is the quantity supplied when P=9? 6. What is the cost of producing potatoes when the quantity supplied is 28? 7. What is the equilibrium Price and Quantity? 8. Calculate the Value to consumers at equilibrium 9. Calculate the Consumer Surplus at equilibrium. 10. Calculate the Cost at equilibrium. 1 1. Calculate the Producer Surplus at equilibrium. 12. Calculate the total gains from trade at equilibrium. B. Suppose the government passes a law to keep the price below $5. 1. How many units of this good will be bought and sold? 2. Calculate the Value to consumers at this quantity. 3. Calculate the Consumer Surplus at this quantity. 4. Calculate the Cost of producing this quantity. 5. Calculate the Producer Surplus at this quantity. 6. Calculate the change in consumer surplus caused by this price ceiling. 7. Calculate the change in producer surplus caused by this price ceiling. 8. Calculate the dead weight loss caused by this price ceiling. C. Draw a demand/supply diagram. Then, draw new curves and use arrows to show the direction of change that happens because of the changes below. What happens to demand, supply, equilibrium price, equilibrium quantity (i.e. rise, fall or no change)? 1. What happens to the market for potatoes if French fries become a popular thing to eat? 2. What happens to the market for carrots if the price for cabbage increases (and land for growing carrots can also be used for growing cabbage)? 3. What happens to the market for ice cream if there is a big decrease in the demand for butter? 4. What happens to the market for clothes made from wool if the cotton crop has a excellent year? D. Five workers are a team in a bakery. Each worker has different abilities: In one hour, Alan can mix enough batter to make 10 trays of donuts or 5 trays of muffins. Betty can mix enough to bake 3 trays of donuts or 6 of muffins. Cathy can mix enough to bake 9 trays of donuts or 3 trays of muffins. Doug can mixes enough for 2 of donuts or 6 of muffins and Edward mixes enough to bake 4 of donuts or 1 of muffins. 1. What does it cost the group in trays of muffins foregone for each of these cooks to mix batter for donuts? Who is the cheapest? Who is the most expensive? 2. Graph the supply curve of donuts. 3. What does it cost the group in trays of donuts foregone for each of these cooks to mix batter to bake muffins? Who is the cheapest? Who is the most expensive? 4. Graph the supply curve of muffins