Question1

Consider the marketsfor DVDmovies,LED TVs., and tickets at movie theaters.

a.Foreach pair, identify whether they are complements or substitutes:

DVDs andLED TVs.

DVDs and movie tickets

TV screens and movie tickets

b.If new research makes it easier to produceLED TVs., what happens to the supply of safeLED TVs.?What will happen to the equilibrium price ofLED TVs.

c.Now that the price ofTV screenhas changed, how does this impact the demand formovie tickets?

d.Draw twodiagrams to show how the change in the market forLED TVsaffects the markets for DVDs and movie tickets.

e.Now let's tie all these linksinto simples'sentences:

1-"In a free market, as engineers and scientists discover new ways to makeLED TVs,the number ofmovie ticketswill tend to _______________."

2-When the price of a gooddecreases,the quantity demanded ________. When the price of a goodincreases,the quantity demanded _______.

Question 2:

a-A student from student athlete has just boughtaTomTom Spark GDP fitness watchfor $120. She would have been willing to pay $240 for a device that could improve hermorning runs by measuring the speed, distance, and duration of the runs, andcalculating the calories she burns. How much consumer surplus does your roommate enjoy from the watch?

b-Using the following diagram, identify and calculate total producersurplus if the price of oil is $30per barrel. Recall that for a triangle, area = (1/2) base height.

c-The market for marbles is represented in the graph. What is the total producer surplus? The total consumer surplus? What are the total gains from trade?