Problems for 2/3/04 - Virginia Commonwealth University
Problems for 2/3/04
Chapter 2, problems 2.3; 2.6; 2.7 2.9
Review Problems. Chapter 1
1. Statistical evidence indicates that equations defining the demand and supply functions for 1 pound bags of Starbucks Coffee at the Ukrops near VCU:
Qd = 1050 – 50P - 100Ps + .1I
Qs = 60 + 20P + 30w
Where P is the price of a 1 pound bag of coffee
Ps is the price of maple walnut scones and
I is the mean per capita monthly disposable income of students.
w = the mean hourly wage paid to coffee roasters.
Currently I = $1,000
Ps = $1.50
w = $8
a) Write the demand and supply curves for Starbucks Coffee
b) Solve for the equilibrium price and quantity
c) Graph your solution. (Hint, you should create inverse demand and supply curves to do this)
Suppose that Starbucks employees negotiate a $2 per hour wage increase.
d) Find the new supply curve
e) Find the new equilibrium
f) On your original graph, chart the change
g) Analyze the changes. When did a change in supply occur? When did a change in quantity supplied occur?
2. Suppose that a society’s conditions of medical care and military goods is given by the equation
3X2 + 2Y2 = 100
Where X represents Bradley fighting vechiles, and Y represents doctors trained
a. Graph this relationship. In your chart illustrate the following
-Inefficient points, and efficient but unattainable points.
- Increasing marginal opportunity.
b. Find the slope of the above expression. Use it to analytically illustrate the notion of increasing marginal opportunity costs
c. Suppose the right hand side of the above expression increased to 200. What effect would that have on your production possibilities frontier? What economic explanation might motivate such a change.
iton
a. The opportunity cost and the
b. Id
(
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