. Explain the law of supply.Why does a supply curve slope upward?Explain the law of demand. Why does the demand curve slope downward?

2.Suppose the total demand for soybeans and the total supply of soybeans per month in the Kansas City grain market are as follows:

Thousands

of bushels

demanded

Price

per

bushel

Thousand

of bushels

supplied

Surplus (+)

or

shortage (-)

95

90

85

80

75

70

$3.75

4.25

5.00

5.50

6.30

7.90

82

83

85

87

89

91

_____

_____

_____

_____

_____

_____

a. What is the equilibrium price? What is the equilibrium quantity?Fill in the surplus-shortage column and use it to explain why your answers are correct.

b.A trade war has impacted the market for soybeans and foreign buyers are no longer purchasing soybeans from the U.S. What will happen to the equilibrium price and quantity for soybeans?

c.The drought conditions in the midwestern states have finally eased and farmers are planting more acres in soybeans. What will happen to the equilibrium price and quantity in the market for soybeans.

d. If (b) and (c) happen at the same time what is the ultimate outcome on the market for soybeans?

3. Determinants of Demand Elasticities ~ Kmart and "Blue Light Specials"

Determinants which affect the degree of elasticity of demand include the elasticity of demand for a product (1) will be greater given the larger the number of substitutes, (2) the smaller the proportion of income or budget an item takes, (3) the item is a luxury or a non-necessity and (4) time, the consumer doesn't need the product right away.

K martalong with a variety of retailers, posts a weekly sales circular on selected merchandise. Kmart originally used the Blue Light Special, which began in 1965, for in-store sales promotion. Today, the Blue Light Specials are also available online. Kmart has decided that demand for these Blue Light Specials is elastic: the decrease in price will increase total revenue. Check out this week's specials and, for each item, score 1 point for meeting the criterion of each determinant above. How many specials score a 4? Does any score 0? Why would K mart include any item that scored less than a 4?