Consider the following supply-and-demand diagrams depicting the markets for X and Y, respectively. In the market for good X, supply is perfectly elastic, indicating that producers are prepared to supply any amount of X at price po. So , S1 So P1 .. ......... D1 Do Quantity of X Do Quantity of Y a. In the market for X, demand increases from D, to D4. As a result, the total value that consumers place on X increases b. The increase in demand for X does not change marginal value that consumers place on X. c. In the market for Y, a technological improvement causes supply to increase from So to S1, causing price to fall from po to p,. The total value that consumers place on a given quantity of Y consumed Price of X Price of Y

Suppose that the market demand for Turkey is given by: Q_(T)=2-8P_(T)+2P_(C)+0.0015I Where Q_(T) is annual quantity demanded of turkey in million pounds, P_(T) is the price of turkey per pound, P_(C) is price of chicken per pound, and I is the average household income in dollars per year. a. Find the annual quantity demanded of turkey if the price turkey is $2.00 per pound, price of chicken is $1.50 per pound and the annual household income is $30,000.

1. Consider the market for Widgets. Suppose that the equation for the supply curve is: Qs = 1,000P – 10,000, and the equation for the demand curve is: Qa = 50,000 – 2,000P. It turns out that the equilibrium price is 20, while the equilibrium quantity is 10,000. a. Use a 10% increase in quantity to estimate (crudely) both the elasticity of supply and the elasticity of demand at the equilibrium quantity. i) Categorize supply and demand as elastic or inelastic at the equilibrium quantity. ii) Is supply or demand relatively more inelastic at the equilibrium quantity? b. If the government enacted a tax of $3, the loss in consumer surplus would be 9,000, while the loss in producer surplus would be 18,000 (see Homework 2, question #2.) Compare this information to your answer to part (a). Explain. c. Now estimate (crudely) the elasticity of demand at a quantity of 11,000 by decreasing quantity by 1,000. Compare your estimate of elasticity to the estimate in part (a). Comment.

When income rises by 10%, the demand for Good A falls by 3%. From the above, we know Good A is O a complement a normal good O an inferior good O a substitute

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suppose there is a spring producing 100 gallons of water each day, without cost to smith, who owns the land around the spring. nearby farmers need the water due to a recent drought a.) show the resulting equilibrium b.) what is the price elasticity of demand at the equilibrium