Microeconomics
The assignments should be typed in Word. Diagrams and graphs, however, may be drawn with a pen and a ruler, drawn using Word/Excel, and scanned/pasted/attached to your submission.
Problem 1
The demand and supply functions for hockey sticks are represented by the following equations, where Qd is the number of crates of sticks demanded, Qs is the number of crates of sticks supplied and P is the price per stick in dollars:
Qd = 286 – 2P
Qs = 88 + 4P
a) Plot the supply and demand curves for hockey sticks.
b) Calculate the equilibrium price and quantity in the market for hockey sticks.
c) A major industry advertising campaign increases the demand for hockey sticks to the new equation Qd = 328 – 2P; plot the new demand curve together with the original demand curve and the original supply curve and calculate the new equilibrium price and quantity; by how much has the revenue to suppliers changed?
d) Returning to the original demand and supply curves, if there was a shortage of wood, causing a shift in the industry supply curve, how would equilibrium price and quantity change?
e) Returning to the original demand and supply curves, if there was a recession causing a contraction in consumer incomes, but not affecting suppliers, how would the curves shift and how would equilibrium price and quantity change?
