Economics 540 Assignment No. 2.1 PROBLEM: Assume that the market for freshly cut Christmas Trees in the town of Podunk is perfectly competitive. In this context, consider the following information on the supply and demand in this market. The size of the town and the number of people looking for Christmas trees is the same in 2016 and in 2017, so the demand is expected to be the same in December 2017' as it was in December 2016. However, the supply ofthe trees is expected to be lower in 2017 than it was in 2016. This is reflected in the following table which shows the quantities demanded and supplied at different prices. Price {P}: 525 520 515 $10 $5 Quantity Demanded {QB}: 300 600 900 1200 1500 Quantity Supplied 2016 {om}: 1500 1200 900 600 300 Quantity Supplied 201T:' {(1317}: 800 600 400 200 I0 (a) Based on this information, use Excel to set up a diagram showing how supply and demand determined the equilibrium price and quantity in the Podunk Christmas tree market in 2016. {BTW: In setting up supply and diagrams diagram, you should always make sure that you have the prices on the vertical axis and that you have the quantities on the horizontal axis.] (b) Based on the additional information on expected supply in 2017, use Excel to set up a diagram which shows how the price and quantity of the Christmas trees is likely to change from December 2016 to December 2017. (c) In the context of your diagram in part b, carefully explains why the price must change. In other words, explain exactly what forces andfor incentives would drive this price change