Question # 1

A.Suppose that brownies are a normal good, brownies and pie are substitutes in consumption, and sugar is a key ingredient used in the production of brownies.Using appropriate demand and supply curves,

i.Suppose today consumer income decreases and the price of sugar decreases.Carefully illustrate and explain how these two events collectively impact the market equilibrium price and quantity of brownies today.That is, do price and quantity today increase, decrease, or based on the information given, you are unable to determine?

ii.Suppose today the price of pie increases and the price of sugar increases.Carefully illustrate and explain how these two events collectively impact the market equilibrium price and quantity of brownies today.That is, do price and quantity today increase, decrease, or based on the information given, you are unable to determine?

iii.Suppose consumers and producers of brownies expect the price of brownies in the future to be much lower. Carefully illustrate and explain how these two events collectively impact the market equilibrium price and quantity of brownies today.That is, do price and quantity today increase, decrease, or based on the information given, you are unable to determine?

B.At an urban college where most students commute to classes, there are 8,000 parking spaces for students.All students pay $150 a semester for a pass that allows them to park in any one of those 8,000 spaces.Between 8 AM and 1 PM there are always students waiting in parking lots for spaces to open up.Students attending classes during this time are always complaining about how difficult it is to find a place to park.Between 5 PM and 9 PM there are always a large number of empty spaces in the parking lots.Students who attend classes at night never have a problem parking.Illustrate the parking situation for these two different times of day using supply and demand curves.Draw separate graphs for the day and night students.Hint:Supply is fixed.Are these "markets" in equilibrium?Explain.