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l. (6 marks] The rst column of the following table describes the price movement of ABC Corporation stoclt over a ve-year period. The second column gives the period's consumer price index. Calculate the real value of the stock for each time period using year 5 as the base year. If you ptnchased $1,000 worth of ABC Corporation in year 1, what has happened to the purchasing power of your original $l. investment whm you sell the stock in year 5? 2. (6 marks] For each of the following situations, what happens to the beer market? Indicate whether the demand curve or the supply curve shifts. and in what direction. Using diagrams, indicate what happens to equilibrium price and quantity. a. The drinking age is raised to 25 years of age. b. The price of wine {a substitute) increases. c. The price of hops {an ingredient in beer production) increases. 3. (6 marks] The supply curve for T-shirts is given by the equation P = -2IJ + 4Q. The demand curve is given by the equation F = E 2Q +51. where I is average income. a. 1|What are the equilibrium price and quantity. at I=4? b. At a price to buyers of $ t fshirt, how much of a surplus or a shortage wl there be? c. If income [I] is increased to It]. nd the new equilibrium price and quantity. 4. (6 marks] Suppose the demand for hamburger is given as Q = 121} 4P Wl'tat is the point elasticity of demand when the price is SEE? What is the Arc elasticity of demand when price changes from $8 to $12? At what price is the demand for hamburger is unit elastic? 5. {15 marks) Consider ovo goods case: movies and eonoerts. Draw indifference curves that represent the preferences of each of the following people. Dene the axes as \"oonoerts per month\" and \"movies per niorith.'1 For each graph, label the direction of preferenoe with an arrow. 1) Mike likes ooncerts but doesn't care whether or not he goes to movies. 2) Ruth like movies but dislikes oonoerts. 3) Marie likes concerts up until she goes to three per month and then starts to dislike extra ones. However, she likes movs no matter how many she sees. ti. (6 marks) The home Seed Cornpany charges $2 per kg for the first III} kilograms you buy ofmarigold seeds each week and $1 per kg for every kilogram you buy thereafter. If your income is Sl per week, draw your budget constraint for the composite good [3? per week) and mari gold seeds. 7". {3 marks) Young Marty loves lollipops and hates oatmeal, but his preferences are strictly convex. To induce him to eat enough oatmeal and to restrain him from eating too many lollipops, his mom pays him $2 for every howl of oatmeal that he cats. The only way he can get lollipops is to buy them at the sweet shop, where lollipops oost $1 each. Besides what he earns from eating oatmeal, Marty gets an allowance of $3 per week. a) Draw Marty's budget line with lolhpops {good} on the vertical axis and oatrneal {bad} on the hmizontal axis. b} Cln a different graph draw some indiffmence curves reecting Marty's preference with lollipops {good} on the vertical axis and oatmeal (bad) on the horizontal axis. c) Combine the budget and ICs on one graph that would be oonsistent with Marty choosing to consume 15 lollipops per week. 3. {6 marks} Jenny's situation is given by the graph below. Composite Good$ 24 , 4 e 3 12 24 (3de Draw the demand curve for good X corresponding to the allow: equilihtia
