Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

For all graphs, be sure to correctly and completely label all axes and curves and use arrows to indicate the direction of any shifts. Assume

For all graphs, be sure to correctly and completely label all axes and curves and use arrows to indicate the direction of any shifts.

Assume that the market for scones is in equilibrium.

  1. Graph the market for scones, assuming unit-elastic supply and demand. Label the equilibrium price Pe and the equilibrium quantity Qe.
  2. Average consumer income goes from $25,000 to $30,000 as the quantity demanded increases from 50,000 units to 60,000 units. What is the income elasticity for scones across this range?
  3. Are scones a normal or inferior good? Explain using the income elasticity coefficient.
  4. Illustrate the effect of part (b) on your graph from part (a), labeling the new equilibrium price and quantity Pe2 and Qe2, respectively.
  5. What happened to the producer surplus as a result of part (d)?
  6. On a new graph, illustrate the effect of an effective price floor on the market for coffee cakes. Label the price floor Pf and the quantity exchanged Qf.
  7. Shade the deadweight loss from the price floor.
  8. The price floor is $3, the quantity consumed with the price floor intersects the supply curve at $2, and there was a loss of 20,000 units from pre-floor equilibrium. Calculate the deadweight loss.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Granularity Theory With Applications To Finance And Insurance

Authors: Patrick Gagliardini, Christian Gourieroux, Christian Gouriéroux

1st Edition

1316057135, 9781316057131

More Books

Students also viewed these Economics questions

Question

In Exercise, determine A + B. 5 2. -3 3. -1 4 7 0 - A = - -4 16

Answered: 1 week ago