Problem 1 Problem 2

Consider the demand for beer during the summer months. QD =

• Price QD QS 30 – 5 P + 0.01 I – 2 R
Where Q: thousands of six-packs
• 10 1000 100 P: price per six-pack in dollars
• 20 800 500 I: income
R: number of rainy days during the summer
• 30 600 900 Supply curve: QS = - 100 + 20 P
• 40 400 1 300 1) Plot the supply and demand curves if I = $ 20 000 and R = 15.
What is the equilibrium price and quantity?
1) Derive the intercepts and slopes for the 2) If I = $ 20 000 and R = 10, plot the new demand curve and
demand curve QD = a + b P and the supply find the new market equilibrium. Compare this to the
original equilibrium.
curve QS = c + d P
2) Find the equilibrium price and quantity

3.0 3.1

Problem 4
Problem 3
1) If the elasticity of supply is equal to 4 at P = $
The demand curve for frozen pizzas is given by 12 and Q = 15 000, what is the equation of
QD = 8 – 2P the supply curve?
What is the demand elasticity at P = 0? P = 2 ? 2) Using the supply curve from part 1) and the
P=4? demand curve, QD = 105 000 – 7 500 P, what
is the equilibrium price and quantity?
3) What will the new equilibrium price and
quantity be if supply increases by 20 percent
at all prices?
3.2 3.3

Problem 5
Problem 5
1) The supply curve for Frisbees is 2) Frisbees have fallen out of fashion recently,
QS = - 10 000 + 5 000 P and the demand curve for Frisbees is now
and the demand curve is QD = 20 000 – 2 000 P
QD = 40 000 – 2 000 P What will be the effect of the price ceiling now?
What will be the effect of a price ceiling of $ 5? Will the market be in equilibrium? If not,
Will the market be in equilibrium? If not, how much excess demand or excess supply
how much excess demand will there be at will there be at the ceiling price?
the ceiling price?

3.4 3.5