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Econ 201 Module 2 Homework

The document contains homework questions for an Economics 201 module, focusing on concepts of supply and demand, equilibrium prices, and market changes. It includes scenarios involving changes in quantity supplied and demand, as well as the effects of government regulations and market conditions on prices and quantities. Students are required to analyze tables and graphs, and provide explanations for shifts in supply and demand curves.

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3 views

Econ 201 Module 2 Homework

The document contains homework questions for an Economics 201 module, focusing on concepts of supply and demand, equilibrium prices, and market changes. It includes scenarios involving changes in quantity supplied and demand, as well as the effects of government regulations and market conditions on prices and quantities. Students are required to analyze tables and graphs, and provide explanations for shifts in supply and demand curves.

Uploaded by

jasmine
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Econ 201

Module 2 Homework

1. Which of the following is an example of a change in quantity supplied? Which is a change in


supply? Explain your answers.

a. Farmers produce more wheat in response to record high wheat prices.

b. Farmers produce less wheat due to adverse weather conditions.

2. Use the table to answer the following questions:


Price Quantity Supplied Quantity Demanded
$2 50 200
$4 100 175
$6 150 150
$8 200 125
$10 250 100
a. If the price is $8, quantity demanded will be____________ and quantity supplied will
be ________.
b. This is a surplus/shortage of __________________ units. (Select correct answer and
provide number)
c. Firms will want to raise/lower prices. (Select correct answer)
d. The equilibrium price is _____________ and equilibrium quantity is
_____________________.

3. Use graph below to answer the following questions.

a. The equilibrium price is ________ and the equilibrium quantity is _______. (Provide
numbers)
4. Based on the graph below:

a. State the equilibrium price and quantity at equilibrium A.


b. The curve shift represents an increase/decrease in supply/demand (Select correct
answers).
c. State one thing that may cause this change.
d. Prices will eventually adjust to reach equilibrium B. But before that happens, will this
create a surplus or shortage?
e. Will firms wish to raise or lower prices in response to this?
f. Will the new equilibrium price (at B) be higher or lower than the original equilibrium
price (at A)?
g. Will the new equilibrium quantity (at B) be greater or less than the original
equilibrium price (at A)?

5. Consider the market for bacon. The price of pork falls. (Pork is an input used to produce
bacon.)
a. State which curve will shift and in which direction.
b. Why did the curve shift (either explain or state which determinant from our lists
changed)?
c. Indicate what will happen to the market price. (Will it increase or decrease?)
d. Indicate what will happen to the equilibrium quantity. (Will it increase or decrease?)

6. Consider the market for bacon. The share of the population who is vegetarian increases.
a. State which curve will shift and in which direction.
b. Why did the curve shift (either explain or state which determinant from our lists
changed)?
c. Indicate what will happen to the market price. (Will it increase or decrease?)
d. Indicate what will happen to the equilibrium quantity. (Will it increase or decrease?)
7. Consider the market for gasoline. The government increases environmental taxes on gas.
a. State which curve will shift and in which direction.
b. Why did the curve shift (either explain or state which determinant from our lists
changed)?
c. Indicate what will happen to the market price. (Will it increase or decrease?)
d. Indicate what will happen to the equilibrium quantity. (Will it increase or decrease?)

8. If a company pollutes while making its product, the market outcome will be inefficient. We
can use government policy to regulate this company in order to reduce pollution.
a. If the government imposes stricter pollution regulation on this company, will supply
increase or decrease?
b. Based on your answer to the previous question, what will happen to equilibrium
price and quantity?
c. Does the original equilibrium (before the regulation) represent a case of market
failure?
d. Why might an economist consider the outcome after the regulation more efficient
than the market equilibrium before the pollution control was in effect (Hint: think
about the effect on others)?

9. Use the supply and demand curves below to answer the following questions:

a. Find the equilibrium:


Interest Rate
Quantity of Borrowing
b. If foreign investors decide to move more money into U.S. financial markets, which
curve will shift and in which direction?
c. If this happens will equilibrium interest rates increase or decrease?
d. Will the quantity of money borrowed increase or decrease?
e. Do you expect new car sales to increase or decrease as a result? Explain your
answer.
10. Consider the following market:
Price Quantity Supplied Quantity Demanded
$5 50 150
$10 72 144
$15 100 136
$20 120 120
$25 150 100

If the government imposes a $15 price ceiling, complete the following:


Quantity Quantity Surplus or Size of Quantity
Demanded Supplied Shortage Surplus or Sold
Shortage

Now assume that, due to a change in the market, the following happens:
Price Quantity Supplied Quantity Demanded
$5 100 150
$10 144 144
$15 200 136
$20 240 120
$25 300 100
a. Is this a change in supply or demand? Is it an increase or a decrease?
b. State one thing that may have caused this change.
c. If the $15 price ceiling is still in effect, find the
i. Price
ii. Quantity Sold
d. What effect will the $15 price ceiling have on the market now? Explain.

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