QUESTION 10

Suppose that the demand function for men's haircuts in a city is as follows:

Qd = 500 - 30p +0.08M,

where p is the price of haircuts and M is the average monthly income in the city.

Suppose that the supply function for haircuts is

Qs = 100 + 20p -30w

where p is the price of haircuts and w is the average hourly wage of barbers.

Assume that M = $5000 and w = $10

Calculate the equilibrium price in this market

	a.	$20
	b.	$25
	c.	$22
	d.	None of the choices

QUESTION 11

Suppose that the demand function for men's haircuts in a city is as follows:

Qd = 500 - 30p +0.08M,

where p is the price of haircuts and M is the average monthly income in the city.

Suppose that the supply function for haircuts is

Qs = 100 + 20p -30w

where p is the price of haircuts and w is the average hourly wage of barbers.

Assume that M = $5000 and w = $10

Calculate the equilibrium quantity in this market.

	a.	300
	b.	240
	c.	500
	d.	None of the choices

QUESTION 12

Given the market for haircuts as established in the previous 2 questions. What amount of disequilibrium in quantity would exist if the government established a price ceiling of $20.

	a.	a surplus of 100
	b.	a shortage of 200
	c.	a shortage of 100
	d.	a shortage of 1000