0 Supply and demand for movie tickets in a city are shown in

0. Supply and demand for movie tickets in a city are shown in the table below. Graph demand and supply and identify the equilibrium. Then calculate in a table and graph the effect of the following two changes. a. Three new nightclubs open. They offer decent bands and have no cover charge, but make their money by selling food and drink. As a result, demand for movie tickets changes by 6 units at every price. b. The city eliminates a tax that it had been placing on all local entertainment businesses. The result is that the quantity supplied of movies at any given price changes by 10%.Price Quantity Demanded Quantity Supplied $5 26 16 $6 24 18 $7 22 20 $8 21 21 $9 20 22

12. Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, sketch a supply and demand diagram to support your answer. a. Cars are becoming more fuel efficient, and therefore get more miles to the gallon b. the winter is exceptionally cold; c. a major discovery of new oil is made off the coast of Norway; d. the economies of some major oil-using nations, like Japan, slow down; e. a war in the Middle East disrupts oil-pumping schedules; f. landlords install additional insulation in buildings; g. the price of solar energy falls dramatically; h. chemical companies invent a new, popular kind of plastic made from oil. How does the ceteris paribus assumption help you in answering this question?

16. Say that the price of cocoa rises sharply at the same time that a greater quantity is consumed. What shift in demand or supply is most likely to have caused this pattern: a. a rise in demand; b. a fall in demand; c. a rise in supply; d. a fall in supply? Explain your reasoning.

17. A low-income country decides to set a price ceiling on bread so they can make sure that bread is affordable to the poor. The conditions of demand and supply are given in the following table. What are the equilibrium price and equilibrium quantity before the price ceiling? What will the excess demand or the shortage (that is, quantity demanded minus quantity supplied) be if the price ceiling is set at $2.40? At $2.00? At $3.60? Price Supply Demand $1.60 5,000 9,000 $2.00 5,500 8,500 $2.40 6,400 8,000 $2.80 7,500 7,500 $3.20 9,000 7,000 $3.60 11,000 6,500 $4.00 15,000 6,000

23. The table below shows information on demand and supply for boxes of 1 dozen water glasses. The lobbyists for the water glass producers persuade the government to establish a price floor of $48 per box. Sketch a diagram of the market for water glasses and identify the following areas. a. Consumer surplus and producer surplus before the price floor is imposed. b. Consumer surplus and producer surplus after the price floor is imposed. c. The transfer of consumer surplus to producer surplus after the price floor is imposed. d. Is the price floor economically efficient? If not, identify the area of deadweight loss. e. Looking at the diagram, can you explain why the lobbyists for the water glass producers might argue for a price floor, even though some deadweight loss will occur? Price Quantity Demanded Quantity Supplied $12 10,000 0 $24 8,000 3,000 $36 6,000 6,000 $48 4,000 9,000 $60 2,000 12,000 $72 0 15,000 ?

24. Many people wish to live in the beautiful town of Beachfront by the sea, but they don’t like the rents. In its current market equilibrium, Beachfront has 20,000 rental apartments at an equilibrium price of $3,000 per month. The voters of Beachfront impose rent controls at the price of $2,000 per month and the number of rental apartments available in the market shrinks to $16,000. Based on this information, sketch demand and supply curves for the town of Beachfront. a. Identify consumer surplus and producer surplus before the price ceiling is enacted. b. Show how the price ceiling transfers producer surplus to consumers. c. Show how the price ceiling creates deadweight loss. d. If you were renting an apartment in Beachfront already, are you likely to care more about the transfer of producer surplus or about the deadweight loss? Explain briefly.

Solution

Answer of first question:

Data of price, demand and supply of movie tickets are give. They are shown in the table below:

Diagram has been drawn showing demand and supply. Blue curve is demand and orange curve is supply. Equilibrium quantity is 21 at price $8. At this price both demand and suplly are equal.

When new food club is set up, demand at each stage will go up by 6 units. Also due to change in tax supply has moved up by 10%. Thus ew demand and supply are shown in subsequent two columns added with previous table. It is show below.

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Answer of 12

When cars have become more fuel effecient, it will travel more miles at less fuel. So consumption of fuel will decrease. as a result demad will decrease. Demand curve will shift to the left from D1 to D0.

When winter is exceptionally cold, most of the office, school, colleges will remain close. Also travel on road will decrease. People will move to other locality. So demand of fuel in the city will decrease. Demand curve will shift to the left.

With the discovery of a major oil mine will increase the supply of oil. So supply curve will shift from S1 to S2 to the right.

Whe economy of major consumer of oil have slowed down, there demand will decrease. Thus demand curve will shift to the left from D1 to D0.

A war in the middle east has disrupt oil pumping schedule. So oil extracted will be low. As a result supply will decrease. So supply curve will move to the left from S1 to S0.

Introduction of additional insulation in the building has no relation with the demand or supply of oil. So it will ot affect demand or supply.

Whe price of solar energy fall, people will use it more. As it is a substitute of oil as energy, the demand of oil will decrease. So demand curve will shift to the left from D1 to D0.

Chemical company has invented a special type of plastic made up from oil. Thus there will be a ew use of oil. It will increase its demad. So demand curve will shift from D1 to D2.

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Answer of 16:

Price of Coca Cola is rising sharply at the same time demad is also rising. It will occur due to shift in demand curvve to the right from D1 to D2. supply curve will ot chage. as a result cutting point of demand and supply will move to the right in upward direction. Thus both price will quatity will rise.

Answer: option (a) is correct

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Answer 17: The problem has stated demand and supply of bread at different prices. They are summarized in the table below:

It indicates that at price of $2.8 both demand and supply are equal. So $2.8 is equilibrium price.

Now government has decided to impose price ceiling. If it is set at $2.40, then 6,400 bread will be supplied while demand will be 8,000. Thus Demand exceeds supply by 1,600 breads.

If price ceiling is $2.00 then Supply of bread will be 5,500 and demand is 8,500. Thus demand exceeds supply by 3,000 bread.

Finally if price ceiling is $3.60 the supply is 11,000 but demand is only 6,500. Now supply exceeds demand by 4,500