Question 1: Please use the distribution of the results (photo 3) from the experiment to construct supply and demand curves for the experimental market (Hint: these supply and demand curves will look like stairsteps). Use the supply and demand curves to identify the equilibrium price and quantity in this market. Draw a graph.

Question 2: Look at the agreed upon prices in each of the different rounds. How closely do they align to the equilibrium price you determined in Question 1. Is the equilibrium quantity similar to that predicted? How do they change from the initial rounds to the latter rounds? Do you feel like this experiment illustrates perfect competition well? Why or why not?

Agreed Price Black Card Black Profit Red Profit Red Card H Number Please record the values of every card dealt regardless of whether a trade occurs or not. N N Please include "No Trade" if no deals happened and record the outstanding red and black cards W UIANNN UI A 10 12 13 14 OOOOOOOOOOUIUINUH OH UH ANUA 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 27 28 Session Length of Time: 4 minutesSupply and Demand Instructions Your Name: We are going to set up a market in which the people on my right will be buyers, and the people on my left will be sellers. There will be equal numbers of buyers and sellers, which is the reason that some of you had to switch to the other side of the room. Several assistants have been selected to help record prices. I will now give each buyer and seller a numbered playing card. Some cards have been removed from the deck(s), and all remaining cards have a number. Please hold your card so that others do not see the number. The buyers' cards are red (Hearts or Diamonds), and the sellers' cards are black (Clubs or Spades}. Each card represents a "unit" of an unspecified commodity that can be bought by buyers or sold by sellers. Tradmgt Buyers and sellers will meet in the center of the room (or other designated area) and negotiate during a 5 minute trading period. When a buyer and a seller agree on a price, they will come together to the front ofthe room to report the price, which will be announced to all. Then the buyer and seller will turn in their cards, return to their original seats, and wait for the trading period to end. There will be several market periods. Selli'ers: You can each sell a single unit ofthe commodity during a trading period. The number on your card is the dollar cost that you incur if you make a sale. You will be required to sell at a price that is no lower than the cost number on the card. Your earnings on the sale are calculated as the difference between the price that you negotiate and the cost number on the card. If you do not make a sale, you do not earn anything or incur any cost in that period. Think of it this way: it's as if you knew someone who would sell you the commodity for a price that equals your cost number, so you can keep the difference if you are able to resell the commodity for a price that is above the acquisition cost. Suppose that your card is a 2 of Clubs and you negotiate a sale price of $3. Then you would earn: 3 2 = $1. You would not be allowed to sell at a price below $2 with this card (2 of Clubs}. Ifyou mistakenly agree to a price that is below your cost, then the trade will be invalidated when you come to the front desk; your card will be returned and you can resume negotiations. Buyers: You can each buy a single unit of the commodity during a trading period. The number on your card is the dollar value that you receive if you make a purchase. You will be required to buy at a price that is no higher than the value number on the card. Your earnings on the purchase are calculated as the difference between the value number on the card and the price that you negotiate. Ifyou do not make a purchase, you do not earn anything in the period. Think of it this way: it's as if you knew someone who would later buy the unit from you at a price that equals your value number, so you can keep the difference if you are able to buy the unit at a price that is below the resale value. Suppose that your card is a 9 of Diamonds and you negotiate a purchase price of $4. Then you would earn: 9 4 = $5. You would not be allowed to buy at a price above $9 with this card (9 of Diamonds). Ifyou mistakenly agree to a price that is above your value, then the trade will be invalidated when you come to the front desk; your card will be returned and you can resume negotiations. Recordmg Earmhgs: Some buyers and sellers may not be able to negotiate a trade, but do not be discouraged since new cards will be passed out at the beginning of the next period. Remember that earnings are zero for any unit not bought or sold (sellers incur no cost and buyers receive no value). When the period ends, I will collect cards for the units not traded, and you can calculate your earnings while I shuffle and redistribute the cards. Yourtotal earnings equal the sum of earnings for units traded in all periods, and you can use the Earnings Record Form on the back ofthis sheet to keep track of your earnings. Sellers use the left side of the Earnings Record Form, and buyers use the right side. At this time, please draw a diagonal line through the side that you will not use. All earnings are hypothetical. Please do not talk with each other until the trading period begins. Are there any questions? Supply and Demand Instructions Elna! Observations". When a buyer and a seller agree on a price, both should immediately come to the front table to turn in their cards together, so that we can verify that the price is neither lower than the seller's cost nor higher than the buyer's value. Ifthere is a line, please wait together. After the price is verified, the assistant at the board will write the price and announce it loudly. Then those two traders can return to their seats to calculate their earnings. The assistants should come to their positions in the front ofthe room. Buyers and sellers, please come to the central trading area NOW, and begin calling out prices at which you are willing to buy or sell. The market is open, and there are 5 minutes remaining. Seller Earnings Buyer Earnings (Sellers [Black suit cards] Use this Side} (Buyers [Red suit cards] Use this Side} _ = First _ = Penod (agreed (black card (earnings) (red card [agreed (earnings) price) cost) value} price} _ _ Second _ _ _ Period _ (agreed (black card (earnings) (red card [agreed (earnings) price) cost) value} price) _ = Third _ = Period (agreed (black card (earnings) (red card {agreed (earnings) price) cost) value} price} _ Fourth _ _ _ Period _ _ (agreed (black card (earnings) (red card {agreed (earnings) price) cost) value} price} _ = Fifth _ = Period (agreed (black card (earnings) (red card [agreed (earnings) price) cost) value} price} Total Earnings Total Earnings for All Periods: for All Periods