YORKVILLE UNIVERSITY WWW.YORKVILLEU.CA d. Based on the movement depicted in the graph, what does it tell you about the elasticity of demand value? (5pt) e. If a price floor was set at $3.00 per pound at the initial market equilibrium, how would this affect the market? (5pt) f. After the first market change has occurred, what happens if there is an overwhelming increase in the demand for tomatoes because of media news claiming that consuming tomatoes is very effective in combating prostate cancer? (5pt) 2. In recent years consumers trying to save money on their high cable bill have been "cutting the cord" and switching to online content streaming for their television entertainment. (30 points) a. Draw a graph to illustrate consumers leaving cable-based television due to the high prices. Explain what is happening on the graph by referring to specific points on it. (10pt) b. Draw a corresponding graph to illustrate the consumers who have left cable and switched over to online streaming services. Explain what is happening on the graph by referring to specific points on it. (10pt) c. Draw a third graph to illustrate the effects of many new firms entering the online streaming market. Explain what is happening on the graph by referring to specific points on it. (10pt) 3. The owner of Grand Central Bookstore is looking into the sales of its Health & Fitness magazine section. She finds that her equilibrium is at 800 magazines per month sold at an average price of $4.75 per magazine. When the price of these Health & Fitness magazines rose to $5.00 each, the quantity sold fell to 725 magazines per month, while the quantity supplied to her increased to 900 a month. From the scenario described, answer the questions below. (40 points) a. Draw an appropriate graph for Grand Central's Bookstore's original Health & Fitness magazine market position. (10pts) b. Calculate the price elasticity of demand for the Health & Fitness magazines between prices $4.75 and $5.00. Is it elastic or inelastic? How do you know? (10pts) c. Calculate the price elasticity of supply for the Health & Fitness magazines between prices $4.75 and $5.00. Is it elastic or inelastic? How do you know based on your answer? (10pts) d. The owner also noticed that when she ran a 20% discount on the Health & Fitness magazines the quantity of nutritious snack bars sold at the checkout register increased by 15%. Calculate the cross elasticity of demand between the two goods. Based on your answer, are they substitutes or complements? Explain why. (10pts) BUSI 1083 MICROECONOMICS YORKVILLE UNIVERSITY 90 80 20 10 22 70 60 50 40 30 0 0 5 10 15 BUSI 1083 MICROECONOMICS Y-Values WWW.YORKVILLEU.CA 20 20 25 30 35 40 45 1. Assume Diagram 1 below represents a market for tomatoes. Answer the questions below based on the graph. (30 points) Diagram 1 $Price/lb 5.00 4.00 3.00 2.00 1.00- S 0 100 200 300 400 500 600 Quantity (lbs) a. What market change does the graph depict? (5pt) b. Suggest two possible reasons for the main change shown in the graph. (5pt) c. How does the change you identified in a) above affect the equilibrium market price? (5pt) BUSI 1083 MICROECONOMICS