Question I Price cents per gallon) 290 300 310 320 330 340 350 Quantity demanded Quantity supplied (thousands of gallons thousands per week) gallons per week) 19288928 80 70 60 50 40 30 20 20 30 40 9882 50 60 70 80 A market research team has come up with the demand and supply schedules for gasoline in Motorville in the table above. Use these data to analyze the situation in the market for gas in Motorville. a) Draw a figure showing the demand curve for gasoline and the supply curve of gasoline. What are the equilibrium price and quantity? b) Suppose the price is $3.30. Describe the situation in the market and explain how the market adjusts. Now suppose the price is $3.00. Describe the situation in the market and explain how the market adjusts. c) The market research report also predicts that a rise in the price of crude oil will decrease the quantity of gas supplied by 20,000 gallons a week at each price. Suppose the price of crude oil does rise. Use your figure to show how this will affect the market for gas. How will the market adjust? What will be the new equilibrium price and quantity? Question 2 Price Quantity demandedQuantity demanded business travelers leisure travelers dollars per ticket) tickets per week) (tickets per week) 1,800 1,600 1,600 1,200 1,400 800 1,200 400 1,000 800 0 100 200 300 400 500 0 0 Suppose that business travelers and leisure travelers have the demand schedules for airline tickets from Atlanta to Philadelphia given in the table above. a) Draw both demand curves. b) As the price of tickets rises from $200 to $300, what is the price elasticity of business travelers' demand? What is the price elasticity of leisure travelers' demand? (Use the midpoint method in your calculations.) c) Why do business travelers and leisure travelers have different price elasticities of demand for airline tickets? d) At what price is the price elasticity of demand equal to 1 for business travelers? For leisure travelers? Explain. Question I Price cents per gallon) 290 300 310 320 330 340 350 Quantity demanded Quantity supplied (thousands of gallons thousands per week) gallons per week) 19288928 80 70 60 50 40 30 20 20 30 40 9882 50 60 70 80 A market research team has come up with the demand and supply schedules for gasoline in Motorville in the table above. Use these data to analyze the situation in the market for gas in Motorville. a) Draw a figure showing the demand curve for gasoline and the supply curve of gasoline. What are the equilibrium price and quantity? b) Suppose the price is $3.30. Describe the situation in the market and explain how the market adjusts. Now suppose the price is $3.00. Describe the situation in the market and explain how the market adjusts. c) The market research report also predicts that a rise in the price of crude oil will decrease the quantity of gas supplied by 20,000 gallons a week at each price. Suppose the price of crude oil does rise. Use your figure to show how this will affect the market for gas. How will the market adjust? What will be the new equilibrium price and quantity? Question 2 Price Quantity demandedQuantity demanded business travelers leisure travelers dollars per ticket) tickets per week) (tickets per week) 1,800 1,600 1,600 1,200 1,400 800 1,200 400 1,000 800 0 100 200 300 400 500 0 0 Suppose that business travelers and leisure travelers have the demand schedules for airline tickets from Atlanta to Philadelphia given in the table above. a) Draw both demand curves. b) As the price of tickets rises from $200 to $300, what is the price elasticity of business travelers' demand? What is the price elasticity of leisure travelers' demand? (Use the midpoint method in your calculations.) c) Why do business travelers and leisure travelers have different price elasticities of demand for airline tickets? d) At what price is the price elasticity of demand equal to 1 for business travelers? For leisure travelers? Explain.