Ch03-HW
1) In Chapter 1, we learned that all economic systems must
define a method of determining how scarce resources are
allocated.
A)
Generally speaking, what determines who gets to consume goods and
services in a market economy?
B) Some
people argue that healthcare provision should be different (note the normative
tone of this statement). Is healthcare scarce? If so, we must create a system
to determine who gets to consume it. Suppose the
2)
A) Draw a
supply and demand diagram to illustrate what is happening to the market for
automobiles.
B) What do you
suppose this is doing to the market for gasoline?
3) Most US states offer tax breaks for firms specializing in
research and development. Draw a diagram to show how this affects the market
for high-tech goods.
4) My wife and I have different demand schedules for hair
products (below).
|
Me: |
|
|
Her: |
|
|
Price ($) |
Quantity |
|
Price ($) |
Quantity |
|
20 |
3 |
|
20 |
15 |
|
30 |
2 |
|
30 |
10 |
|
40 |
1 |
|
40 |
5 |
|
50 |
0 |
|
50 |
2 |
A) Aggregate these to show
our household contribution to market demand. Graph it.
B) What is my willingness
to pay for a second product? How many products does my wife buy if the price is
$40?
5) This is a challenging but
important problem. Suppose the market for televisions is described by a supply
curve (P = 3 * Q) and a demand curve (P = 1000 – Q).
A)
Graph the supply and demand curves, and calculate the equilibrium price and
quantity sold.
B) Suppose the government imposes a
$200 tax on SELLERS. Shift the supply curve to reflect this policy. What is the
equilibrium quantity sold? What price do consumers pay? What price do sellers
earn after paying the tax?
C) Suppose the government imposes a
$200 tax on CONSUMERS. Shift the demand curve to reflect this policy. What is
the equilibrium quantity sold? What price do consumers pay after paying the
tax? What price do sellers earn?
D) When the government institutes a
tax, does it matter if it is imposed upon firms or
consumers?