Economics
Economics
Always show all work when solving problems.
SECTION ONE:Â Â Â Â Â Â 2 points
Brad and Angelina are the only demanders of candy bars. Their demand schedule is as follows:
$0.00Â Â Â Â Â Â 12Â Â Â Â Â Â 7
0.50Â Â Â Â Â Â 10Â Â Â Â Â Â 6
1.00Â Â Â Â Â Â 8Â Â Â Â Â Â 5
1.50Â Â Â Â Â Â 6Â Â Â Â Â Â 4
2.00Â Â Â Â Â Â 4Â Â Â Â Â Â 3
2.50Â Â Â Â Â Â 2Â Â Â Â Â Â 2
3.00Â Â Â Â Â Â 0Â Â Â Â Â Â 1
Good and Plenty are the only two companies supplying candy bars. Their supply schedule is as follows:
$0.00Â Â Â Â Â Â 0Â Â Â 0
0.50Â Â Â Â Â Â 0Â Â Â 0
1.00Â Â Â Â Â Â 1Â Â Â 0
1.50Â Â Â Â Â Â 2Â Â Â 2
2.00Â Â Â Â Â Â 3Â Â Â 4
2.50Â Â Â Â Â Â 4Â Â Â 6
3.00Â Â Â Â Â Â 5Â Â Â 8
a)   Draw a market demand curve showing each price and quantity . Please TYPE what is true at $1.
b)Â Â Â Draw a market supply curve showing each price and quantity. Please TYPE what is true at $1.
c)Â Â Â Draw a figure showing the market equilibrium price and quantity. Please type an explanation of what you have just drawn.
d)Â Â Â What would be true if the price of candy bars was 50 cents below the equilibrium price?
** No credit will be given if all the typed answers are not included.
SECTION TWO:Â Â Â Â Â Â 1.5 points
In this section, you will be discussing the concept of elasticity.
a)Â Â Â In this part, you will be solving for various price elasticities of demand. I will give you a number of prices with their quantities demanded. Please set up a table for each price and quantity (columns 1 and 2) Column three will show total revenue at each price /quantity combination. Column four will show each price elasticity of demand. Note that each elasticity will be between two prices; for example, you will find the price elasticity of demand between $7 and $6, then between $6 and $5, and so on. Here are the numbers to get you started:
PRICEÂ Â Â Â Â QUANTITY
$7Â Â Â Â Â Â 0
6Â Â Â Â Â Â 2
5Â Â Â Â Â Â 4
4Â Â Â Â Â Â 6
3Â Â Â Â Â Â 8
2Â Â Â Â Â Â 10
1Â Â Â Â Â Â 12
0Â Â Â Â Â Â 14
When complete, you will have calculated 7 elasticities.
b)Â Â Â What is true of price elasticity of demand as price falls from $7 to $0? Explain.
SECTION THREE:Â Â Â Â Â Â 0.5 points
Assume demand for a food product is inelastic. At $3, farmers sell 100 bushels of this food product. An advance in technology drops the price of the product to $2 where farmers sell 110 bushels of the food product.
a)Â Â Â Are the farmers better off or not? Explain.
b)Â Â Â Are supply and demand more likely to be elastic in the short run or the long run? Explain your answer.
SECTION FOUR:Â Â Â Â Â Â 1 point
Here, you will provide short answers to a number of questions.
a)   a) A group of moviegoers buy popcorn during a movie. Each person has an income of $110. At 25 cents an ounce, 12 ounces of popcorn are purchased during the movie. A month later, each person has an income of $120 and 16 ounces of popcorn are purchased during the movie.
Calculate and show the income elasticity of demand for popcorn.
b)Â Â Â Is popcorn a normal or inferior good?
c)Â Â Â Is the minimum wage a price ceiling or a price floor? Explain.
d)Â Â Â Is the minimum wage efficient or inefficient? Please explain fully your answer.
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