Tutorial 3 1. The table sets out the demand and supply schedule for chips.

Price (cents per unit) 50 60 70 80 90 100 Quantit y demand ed (mil) 160 150 140 130 120 110 Quantit y supplied (mil) 130 140 150 160 170 180 a)Draw a graph of market for chips and mark in the equilibrium price and quantity. b)Suppose that a bag of chip is 70 cents a unit. Describe the situation in the market and explain how the price adjusts. c)Suppose the new dip comes on to the market, which is very popular and the demand for chips increases by 30 million bags per week. i)Has there been a shift of or a movement along the supply curve of pencils? ii) Has there been a shift of or a movement along the demand curve for pencils? iii) What are the new equilibrium price and equilibrium quantity of chips? d) In problem c), suppose that bad weather destroys several potato farms with the result that the supply of chips decreases by 40 million bags a week at the same time as the dip comes on to the market. What are the new equilibrium price and quantity of chips?

For each question, draw a market in equilibrium, labeling the initial equilibrium price and equilibrium quantity. Then shift the appropriate curve and label the new equilibrium price and equilibrium quantity. Next, describe what happened. Subsidies to producers of this good increase: a) What will happen if there is an increase in the number of buyers of this good at the same time that subsidies to producers of this good decrease, and demand and supply shift by equal amounts? b) What will happen if there is an increase in income and this is an inferior good and, at the same time, subsidies to producers rise, and demand and supply shift by equal amounts?

2. Price is $10, quantity supplied is 50 units, and quantity demanded is 100 units. For every $1 rise in price, quantity supplied rises by 5 units and quantity demanded falls by 5 units. What is the equilibrium price and quantity?
3. Below are the demand/supply schedules for tennis Nika shoes

PRICE PER PAIR (RM) 105 90 75 60 45 30 15

QUANTITY DEMAN DED 25,000 30,000 40,000 50,000 60,000 80,000 100,000

QUANTITY SUPPLI ED 100,000 80,000 60,000 50,000 40,000 30,000 20,000

a) What is the equilibrium price and quantity of Nika shoes? b) Name any three general factors that can change the demand of Nika shoes. c) Name any three general factors that can change the supply of Nika shoes.