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Eco 302 Intermediate Microeconomics Homework it 2 (40 points) 1. (8 points) The market demand and supply functions for dry cleaning services are given by the following equations. (25 = 500 -1DDP 0:: = 25" where P is the price ofa shirt dry cleaned in Salem and Q is the number of shirts demanded and supplied. a. Find the equilibrium price and quantity in the dry cleaning market. b. Due to a newly invented detergent spray which cleans as good as dry cieaning, demand for dry cleaning services declined by 25%. Find the new equilibrium price and quantity in the dry cleaning market. 2. (16 points) The market demand and supply functions for beer by the pack are given by the following equations. Qd = 750 50F + 0.25I Q3 = 900 + SOP 400PW where P is the price of a pack of beer, I is the average income of a consumer in Salem and PW is the price of wheat {major input in beer production). a. (8 points) Suppose the average income of a consumer is $1,000 and the price of wheat is $1 per pound. II Graph the Supply and Demand curves. II Calcuiate the equilibrium price and equilibrium quantity of beer. b. (8 points} Suppose due to a drought the price of wheat increases from $1 to $1.25. I Write down the new supply equation for beer. I Calculate the effect of change in wheat prices on the equilibrium price and quantity of beer. - Sketch the new supply curve on the graph you produced for part {a}. 3. (16 points) For each of the 4! markets given in the below table: 0 Draw the initial market equilibrium and clearly mark the price and quantity. jThere are no eguations for this Question. You need to draw random demand and supply curves[. 0 Determine the effect of the events on the corresponding market by identifying the shift in the relevant curves. I Find the new equilibrium price and quantity and report the change in them. 0 (Le. Final Price: higher or lower? Final Quantity: higher or lower?} Market Event Technological advances reduce the 1. internet capable cell cost of producing SIG chipsets used phones in cell phones The price of downloadable songs on 2. iPods iTunes decreases Public lost their interest in popularity 3. Skateboards of hover boards New taxes reduced the net income of the households. (Assume that 4. McDonald's Food McDonalds food is an inferior good]