Problem 2: Suppose that gas and cars are complements in demand (i.e. if the price of one of the goods rises, then the demand curve for the other good shifts downward). If there is an increase in the supply curve for gas (e.g. due to the discovery of new oil reserves), and both markets are perfectly competitive, will be price of gas decrease more than or less than you would predict if you ignored general equilibrium effects? Explain with a diagram.

Corn can be used to make tortilas or to make ethanol fuel for trucks and automobiles. Which of the following statements is incorect? O Increased production of com is likely to result in a higher price for both ethanal and tortillas. An increase in the price of ethanol is likely to resut in increased production of com Onereased demand for tortiles is likely to resut ina higher price for ethanol An increse in the price of ethanal liety to esut in an inose in the price of tortilas

1. Suppose you are the economic adviser of a company producing three brands of mobile pones; Nokia 10, Samsung X and iPhone Z. Suppose further that, your company eurrently sells 120 units of iPhone Z at ¢800 per unit, 150 units of Samsung X at ¢800 per unit and 200 units of Nokia 10 at ¢100 per unit, but in a bid to maximize profit, the company's managing director proposes an increase in price of Samsung X from e 800 to e1000 per unit for which quantity demanded is anticipated to fall from 150 to 100 units; iPhone Z from e800 to e1200 per unit for which quantity demanded is anticipated to fall from 120 to 100 units; and Nokia 10 from e100 to 200 per unit for which quantity demanded is expected to fall from 200 to 100 units. . Using the mid-point formula, compute the price elasticity of demand for each brand. From your answer in i, what is the type and economic interpretation of each brand's value of elasticity, i. 2. i. Briefly explain any three key features of a Perfect Competitive…

Assume that coffee and tea are substitutes. John and Pamela are vendors at MANCOSA campus. John sells tea and Pamela coffee. They usually sell these drinks at R15 per cup, However, it is a cold Monday morning and Pamela decides to decrease the price of coffee to R12 a cup. The resultant effect would be movement along the demand curve for coffee takes place since it is a change in the price of coffee. Select one: O True O False

Suppose that Felix and Janet represent the only two consumers of laundry detergent in some hypothetical market. The following table presents their annual demand schedules for laundry detergent: Price (Dollars per bottle) 2 4 PRICE (Dollars per bottle) 12 10 On the following graph, plot Felix's demand for laundry detergent using the green points (triangle symbol). Next, plot Janet's demand for laundry detergent using the purple points (diamond symbol). Finally, plot the market demand for laundry detergent using the blue points (circle symbol). 2 6 Note: Line segments will automatically connect the points. Remember to plot from left to right. 0 8 10 0 Felix's Quantity Demanded Janet's Quantity Demanded (Bottles) 16 (Bottles) 24 10 16 12 8 4 8 16 6 2 0 24 32 QUANTITY (Bottles) 40 48 A Felix's Demand Janet's Demand Market Demand (?)

Let's say that the demand side of the market for Blue Soda is comprised of 3 leading agents/individuals: Anthony, Brad, and Claire. Let P be the price of 1 liter of Blue Soda, and Qd be the quantity demanded of Blue Soda in liters. Here are the key points to the problem: - Anthony buys only one liter of Blue Soda if the price of it falls below his choke price of $10. - Brad's demand for Blue Soda is defined by QdB = 5 - P/2 - Claire buys 2 liters if the price is below $5, 1 liter if the price is between $5 and $10, and nothing if the price is above $10. Using this information, please sketch the individual demands and the market demand by aggregating the three agents/individuals. Label the graph clearly. Please make sure to sketch the individual demands first and then sketch the market demand.

Suppose the market for wooden picnic benches experiences the following event: The price of plastic picnic benches (a substitute for wooden picnic benches) decreases in price. The effect on equilibrium will be: O Increase in equilibrium price and quantity O Decrease in equilibrium price and increase in equilibrium quantity Increase in equilibrium price and decrease in equilibrium quantity O Decrease in equilibrium price and quantity

Identify the effect each scenario would have on the market for various products.For each scenario:- Label the P & Q of the graph as well as the original supply curve, demandcurve, and market equilibrium (S1, D1, E1).- Identify whether it would first cause a shift in supply or demand and draw andlabel the new curve and market equilibrium (S2 or D2, E2)-Identify whether the equilibrium price and quantity will increase or decreasea. Insects kill half the nation’s tomato crop. What will happen to the market fortomatoes?b. The price of salmon, a substitute for tuna, skyrockets. What will happen to themarket for tuna?c. New assembly line technology makes it cheaper to produce car parts. Whatwill happen to the market for cars?

Suppose that Felix and Janet represent the only two consumers of jeans in some hypothetical market. The following table presents their annual demand schedules for jeans: Price (Dollars per pair) 10 20 60 50 On the following graph, plot Felix's demand for jeans using the green points (triangle symbol). Next, plot Janet's demand for jeans using the purple points (diamond symbol). Finally, plot the market demand for jeans using the blue points (circle symbol). Note: Line segments will automatically connect the points. Remember to plot from left to right. PRICE (Dolars per pair) 8 40 20 10 D 30 40 50 0 16 Felix's Quantity Demanded Janet's Quantity Demanded (Pairs) (Pairs) 32 48 20 32 12 24 4 16 8 32 0 48 64 QUANTITY (Pairs) 80 96 4 Felix's Demand > Janet's Demand Market Demand

1. Suppose that the initial demand and supply curves for coffee are illustrate by D¹ and S¹ in the graph below. Assume that coffee and kringle, a Danish pastry for which Racine is well-known (O&H Bakery makes the best, imho) are complements in consumption. Clearly label all additions to the graph. a) Suppose that the initial market price of coffee, Po, is $4 per cup (Po = $4). Determine and illustrate the quantity demanded at Po (labeled as Qod), and the quantity supplied at Po (labeled as Qo³). Show Qod and Qos on the quantity axis. Is the market in equilibrium at Po = $4? If not, state whether a surplus or shortage exists at Po, calculate its magnitude, and illustrate it graphically. Illustrate and explain the market equilibrium quantity and price, denoted Q₁* and P₁*, and label the market equilibrium as point E¹. (7 pts) b) Next, suppose that the price of kringle increases. In the same graph, illustrate the resulting new market equilibrium quantity and price for coffee, Q* and P2*,…