Quiz

1
Quiz 2
2
Quiz 2
The demand for product A and for product B are
affected by the incomes of their buyers. The
demand for A decreased drastically when buyers
incomes increased. 1. Is A an inferior good or a
superior (normal) good?
3
Quiz 2 (Continued)
In England, in February of 1996, a new McDonalds
restaurant opened. In September of 1996 a new
Pizza Hut opened a half-block away. In January
of 1997 the price of hamburgers went up by 45.
The increase in pizzas sold was so great that
Pizza Hut had to hire more workers. 2. Does this
show a complementary or substitute
relationship between hamburgers and pizzas in
England?
4
Quiz 2 (Continued)
Given the following monthly demand and supply
schedules for a market with 3 buyers and 4
sellers
Price QD1 QD2 QD3 Qs1 Qs2 Qs3 Qs4 80 1 2
1 6 6 6 6 60 2 3 3 4 4 4 4 40
3 4 5 3 3 3 3 20 4 5 7 1 1 1 1
You are asked to analyze this market over a
two-month period (quantities are units per
month). The data given is for November 1999.
Assume that in December 1999, seller 4 goes
bankrupt andsells nothing, and buyer 1 dies.
5
Quiz 2 (Continued)
3. What is the equilibrium market price and
quantity sold in November? What is the
equilibrium market price and quantity sold in
December? 4. If the government pegged the
price at 60 in November would this be a
price ceiling or a price floor?
6
Quiz 2 (Continued)
5. Assume you are over 16 years old and were
surveyed by the CPS. In the week of the
survey, you were not working because you were
in college full-time. Would you be
classified as employed unemployed or not in
the labor force?
7
Quiz 2
The demand for product A and for product B are
affected by the incomes of their buyers. The
demand for A decreased drastically when buyers
incomes increased. 1. Is A an inferior good or a
superior (normal) good?
Inferior Good
8
Quiz 2 (Continued)
In England, in February of 1996, a new McDonalds
restaurant opened. In September of 1996 a new
Pizza Hut opened a half-block away. In January
of 1997 the price of Hamburgers went up by 45.
The increase in pizzas sold was so great that
Pizza Hut had to hire more workers. 2. Does this
show a complementary or substitute
relationship between hamburgers and pizzas in
England?
Substitutes
9
Quiz 2
Price QD1 QD2 QD3 Qs1 Qs2 Qs3 Qs4 80 1 2
1 6 6 6 6 60 2 3 3 4 4 4 4 40
3 4 5 3 3 3 3 20 4 5 7 1 1 1 1
QDM 4 8 12 16
QSM 24 16 12 4
4. Equilibrium in November occurs at that
price where QDM QSM. P
40 and Q 12.
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Quiz 2
Price QD1 QD2 QD3 Qs1 Qs2 Qs3 Qs4 80 1 2
1 6 6 6 6 60 2 3 3 4 4 4 4 40
3 4 5 3 3 3 3 20 4 5 7 1 1 1 1
QSM 18 12 9 3
QDM 3 6 9 12
4. In December, seller 4 leaves the market.
Buyer 1 dies. Quantity falls, price remains
constant. P 40 and
Q 9.
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Quiz 2
QSM 24 16 12 4
Price QD1 QD2 QD3 Qs1 Qs2 Qs3 Qs4 80 1 2
1 6 6 6 6 60 2 3 3 4 4 4 4 40
3 4 5 3 3 3 3 20 4 5 7 1 1 1 1
QDM 4 8 12 16
5. If the price were set at 60, it would be
above the equilibrium price -- Thus it would be a
PRICE FLOOR.
12
Quiz 2 (Continued)
5. Assume you are over 16 years old and were
surveyed by the CPS, and in the week of the
survey, you were not working because you were
in college full time. Would you be
classified as employed unemployed or not in
the labor force?
13
S
S
This is a decrease in S D causing quantity to
decrease, but no change in price.
Pe
Pe
D
Qe
Qe