(for the first two I just need help drawing an example because it has no data to go with it just that some products increase or decrease and I'm not sure how to do the other questions, appreciate the help)

INSTRUCTIONS FOR DRAWING GRAPHS: Follow these directions for Problem Set questions that ask you to draw a graph that is for any supply and demand model. Follow these directions as closely as possible if the question is just asking for one part of this model (say, just a demand curve or just a supply curve). (1) Draw the vertical axis and label it $ Price. (2) Draw the horizontal axis and label it Quantity. (3) Draw and label the Demand curve (label with D) (4) Draw and label the Supply curve (label with S) (5) Label the equilibrium price on the vertical axis with P1 (6) Label the equilibrium quantity on the horizontal axis with Q1. (7) If the question involves a shift in a curve, always label the new curve and always label the new equilibrium price and quantity.

1. Sketch a demand curve for beef, labeling the vertical axis and the horizontal axis and labeling the demand curve itself. Then, using this graph, show what would happen for each of the following Page 2 of 4 "events." Feel free to sketch a new drawing for each of the three "events" below if it is easier to show clear graphs that way. Also, EXPLAIN what happens with each "event." a. Consumer income increases. b. The price of chicken (a substitute) increases. c. The price of barbecue grills (a complement) increases.

2. Consider two goods: pizza and sodas. Assume that the pizza and soda are consumed together, which means that they are complement goods. This question is asking you to show relationships across two different markets (two different graphs). a. Sketch the demand curve for pizza and correctly label both axes. b. Sketch the demand curve for soda and correctly label both axes. Remember that this demand curve for soda must be drawn on an entirely separate graph than the one for pizza. c. Imagine that there is an increase in the price of pizza. Answer the questions below. HINT: Be sure to make the distinction between a change in demand and a change in quantity demanded in your responses. i. SHOW the impact of this increase in the price of pizza using the graph you already drew for pizza. DESCRIBE in words what has happened, being sure to address the issue raised in the HINT above. ii. SHOW the impact of this increase in the price of pizza on the demand for soda, using the graph that you already drew for soda. DESCRIBE in words what has happened, being sure to address the issue raised in the HINT above. d. Using what you have shown and described in the responses above, describe the relationship between a price increase for one good and the demand for another good when the two goods are complements. Now, explain how your answer would change if the two goods were substitutes, not complements.

Chapter 3 (10 points maximum) 1. This question is about the worldwide supply of coffee. What would be the effects of each of the following "events" on the supply of coffee worldwide? In each response, identify the responsible determinant of supply. HINT: This means to explain WHY / HOW you justify your response. a. Freezing temperatures wipe out half of Brazil's coffee crop. b. Wages of coffee workers in Latin America rise as unionization efforts succeed. c. Genetic engineering produces a super coffee bean that grows faster and needs less care. 2. You have landed a job as an analyst working for a company that is selling a new environmentally friendly single cup coffee maker. a. Using the accompanying supply plan in the table below, DRAW your company's individual supply curve. b. Does your company's supply curve follow the Law of Supply? Explain how you know. c. What would happen to this supply curve if there were an improvement in the technology used to product this coffee maker? SHOW on the graph that you have drawn and DESCRIBE in words.

Price | Quantity Supplied (in thousands)

$100 | 0

$150 | 500

$200 | 1000

$250 | 1500

$300 | 2000

$350 | 2500

$400 | 3000

Chapter 4 (10 points maximum) 1. Draw the graph for the supply and demand model for pencils (follow the directions listed above). Assume that the equilibrium price equals $10 per box of pencils and the equilibrium quantity is 120 boxes. A. Imagine that the price somehow, temporarily, were $12 instead of the equilibrium price of $10. SHOW on the graph the quantity supplied and quantity demanded at this $12 price. (You can draw this in a horizontal line, starting on the vertical axis right where the price equals $12, all the way across the graph, hitting both the demand curve and supply curve.) Label these two quantities on the horizontal axis. At this temporary price of $12, is there a surplus? A shortage. B. Answer this part of the question ignoring (A) above. Imagine that there is an increase in average family income. How would this affect the graph? Show on the graph and explain in words. Show any shift of any curve(s) and label any resulting change in equilibrium price and quantity. Explain carefully. 2. Draw a graph for the supply and demand model for pencils (follow the directions listed above). Imagine there is a decrease in the price of the wood used to produce the pencils, and AT THE SAME TIME, there is a decrease in the price of pens (which we will assume is a substitute good for pencils). Explain very carefully what would happen in this market. Show on the graph. Show any changes in equilibrium price and quantity. [NOTE This is a tough question. You will see that both curves are shifting at the same time. You have to figure out which curve shifts in which direction, and then figure out the resulting impact on equilibrium price and quantity. Yes, there is an example of this in the textbook!]

Chapter 5 (10 points maximum) 1. When the price of a coffee mug equals $15, the quantity demanded is 10 coffee mugs. When the price of a coffee mug falls to $12 per coffee mug, the quantity demanded increases to 12 coffee mugs. Calculate the price elasticity of demand for coffee mugs in this price range. Start by writing the formula for the price elasticity of demand, and show all of your calculations. Page 4 of 4 2. Assume that the price elasticity of demand for shampoo is calculated to be -0.8. Answer the questions below based on this information. A. What is the verbal interpretation of this elasticity? B. Is demand for shampoo ELASTIC or INELASTIC? c. Would an increase in the price of shampoo cause an increase or decrease in total consumer spending on shampoo? Explain. (Note that total consumer spending is also known as total revenue.) 3. How can you use the cross price elasticity of demand to determine whether two goods are complements or substitutes? In other words, what values of the cross price elasticity tell us that the two goods are complements and what values of the cross price elasticity tell us that that the two goods are substitutes?