ECON 201 BC Demand Substitute Good & Regulations Economics Worksheet
Description
1. Write a paragraph for both. Suppose there is a linear downward-sloping demand curve and a linear upward-sloping supply curve for a good. Graph the original demand and supply curves to explain how the equilibrium price will change?a. The price of a substitute good increases and the price of an input to production also increases. b. Government regulations increase the cost of producing gasoline while at the same time government regulations reduce the cost of driving a relatively inefficient sport utility vehicle (SUV).2. Write a paragraph for all three. Jim has $100 income to spend on tea and coffee. The price of coffee is $4 per cup and the price of tea is $2 per cup. He has a standard indifference curve. Currently, he chooses to consume 20 cups of tea and 15 cups of coffee.a. Draw the budget constraint line and the indiffeence curve for Jim. Specify the x and y intercepts of the budget constraint line. Mark the optimal point on consumption.b. The price of coffee went down to $2 per cups. Draw the new budget line and clearly mark the intercepts (post a picture). With this new price, Jim chooses to consume 25 cups of tea and 25 cups of coffee. Mark the optimal point on the new budget constraint line. c. Explain graphically the substitution and income effect as a result of a drop in coffee price.Question 3 and 4 please see the picture.
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33) (10 pts) Suppose the market for grass seed can be expressed as
Demand: QD = 100 – 2p
Supply: QS
3p
=
If government imposes a 10% ad valorem tax to be collected from sellers, what is the price consumers will pay?
How much tax revenue is collected?
34) (10 pts) Suppose the production function for T-shirts can be represented as q = _ 0.25K0.75.
a. When K=1 and q = 2, how many labor is used?
b. When K=1 and q = 2, what is the slope of the isoquant?
c. Given that price of labor is 5 and price of capital is 10, is current usage of K and L optimal? if not, how should
it be adjusted?
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Explanation & Answer:
4 Questions
Tags:
demand curve
regulations
Substitute Good
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