Homework #1 Name: ___________________________________________

1. Debbie quits her job, which pays $30,000 a year, to finish her college degree. Her annual college expenses are $10,000 for tuition, $2,000 for books, and $700 for food. What are the direct educational costs? What are the direct non-educational costs? What are the indirect/opportunity costs?

1. Sarah is pregnant and needs to go to the doctor for her antenatal care visits. She works at the local grocery store making minimum wage $10 per hour. She will have to pay for the visit ($35) as well as the medicines ($25). It will take her 3 hours to get to the facility and she has to pay for the bus which will be $5. She cannot go to work for these three hours. She also buys a snack on the bus for $2. What is her total cost of going for one antenatal care visit. What are her direct medical and direct non-medical costs and indirect/opportunity costs?

Problem #3. Explain each of the following statements using supply and demand diagrams.

1. Draw the supply and demand for orange juice. When a cold snap hits Florida, the price of orange juice rises in super markets throughout the country. Show why this would happen by moving the either the supply or demand curve.

1. Draw the supply and demand for Caribbean hotel rooms.When the weather turns warm in New England every summer, the price of hotel rooms in Caribbean resorts plummets. Show why this would happen by moving the either the supply or demand curve.

4. Consider the market for health care (assume at this point no insurance). Draw a graph with demand and supply curves and interpret the graph. An outbreak of a terrible disease happens in your country. Which curve will be impacted. How will this affect prices?

There is a strike and health care workers decide not to show up to work.

An outbreak and a strike occur at the same time.

5. A survey shows an increase in drug use by young people. In the ensuing debates two hypotheses are proposed. Draw the supply and demand for illegal drugs in each scenario.

• Reduced police efforts have increased the availability of drugs on the street.
• Cutbacks in education have decreased awareness of the dangers of drug addiction.

Use supply-and-demand graphs to show how each of these hypotheses could lead to an increased in the quantity of drugs consumed.

6.The market for pizza have the following demand and supply schedules:

Price	Quantity demanded	Quantity supplied
$4	135 pizzas	26 pizzas
$5	104 pizzas	53 pizzas
$6	81 pizzas	81 pizzas
$7	68 pizzas	98 pizzas
$8	53 pizzas	110 pizzas
$9	39 pizzas	121 pizzas

1. Graph the demand and supply curves. What is the equilibrium price and quantity in this market?

1. If the actual price in this market were abovethe equilibrium price, what would drive the market towards equilibrium?

1. If the actual price in this market were belowthe equilibrium price, what would drive the market towards equilibrium?