Problem Set 2 ̶ Supply and Demand Question 1
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- Question 16
- Question 17
- Question 18
- Question 19
- Question 20
| Question 15 There is a sharp freeze in Florida that damages the orange harvest and as a result, the price of oranges rises. Will the equilibrium price of orange juice rise, fall, or remain constant Will the equilibrium quantity of orange juice rise, fall, or remain constant Present a supply and demand curve diagram to defend your answers. Question 16 For each of the following situations, sketch the demand curve as accurately as possible. a. Appendectomy is a lifesaving operation that some people need. Regardless of the price, the quantity demand is 300,000 every year. b. For any price above $5 absolutely nobody will buy your lemonade, but for any price below $5 you find that you are able to sell as much lemonade as you like. c. There is only one buyer. For any price above $100 this buyer wants nothing. For any price at or below $100 this buyer wants exactly 20 units. Question 17 Land in Sonoma, California, can be used to either grow grapes for pinot noir wine or to grow Gravenstein apples. The demand for pinot noir shifts suddenly and sharply to the right. What will be the effect of the increase in demand for pinot noir on the equilibrium price and quantity of Gravenstein apples Question 18 Suppose one of your friends offered the following argument A rightward shift in demand will cause an increase in price. The increase in price will cause a rightward shift of the supply curve, which will lead to an offsetting decrease in price. Therefore, it is impossible to tell what effect an increase in demand will have on price. Do you agree with your friend If not, what is the flaw in your friend’s reasoning Question 19 New York decides to reduce the consumption of sugary soda by imposing a minimum price of $2.50 per soda. The current equilibrium price is $1.50. Sketch the supply and demand for soda and show the effect of this policy. Clearly label the excess supply in your diagram. Question 20 Lobsters are plentiful and easy to catch in August but scarce and difficult to catch in November. In addition, vacationers shift the demand for lobsters further to the right in August than in any other month. Compare the equilibrium price and quantity of lobsters in August to the equilibrium price and quantity of lobsters in November. Present and discuss a supply-and-demand diagram to explain your answers. |