When a hurricane hits the supply of electricity can be interrupted. To address this issue people often purchase their own generators. Suppose a storm watch is issued for the Southeast:

a. What is likely to happen to the equilibrium price and quantity in the market for generators in the Southeast?

b. Is this a movement along the curve or a change in the curve? Explain.

c. Describe the process of moving from one equilibrium to another.

2. You recently noticed that the price of lobster in your local supermarket increased but at the same time fewer lobsters were sold.

a. Using a supply and demand analysis, how could this happen? Explain.

b. Is this a movement along the curve or a change in the curve? Explain.

c. Describe the process of moving from one equilibrium to another.

3. The weekly supply and demand for cupcakes in a small town are given as Qs = 30P - 20 and Qd = 124 - 18P, where P is the price of a cupcake and Q is measured in thousands per week. What is the equilibrium price and quantity in this market?

4. Consider the following (inverse) demand curve: P = 100 - 20Q. Calculate consumer surplus at the following prices

a. P = 80

b. P = 60

c. P = 100

d. Comment on what happens to consumer surplus when the price falls.

5. Right after September 11, 2001 the demand for air travel fell. Using a graph show the change in consumer and producer surplus as a result. Comment on whether there is a deadweight loss in this case. Identify the areas under the curves using capital letters.

6. One common price ceiling is rent control.

a. Using a graph show the consumer and producer surplus before and after the rent control is implemented.

b. How many apartments are rented?

c. Identify the deadweight loss and describe what it measures?

d. What are some of the key problems with price ceilings?