3 Economy 101 questions
UNDERWOOD UNIVERSITY
PRINCIPLES OF ECONOMICS I
Quiz 2
Instructor: Dr. Kodjo, Jilou
Date_____________________ Student Name____________________________________
Exercise 1 The equilibrium rent for a one-bedroom apartment in Buckhead Atlanta $1,000 per month. Atlanta local government decides to place a price ceiling on apartments. The price ceiling it set at $800 meaning a rent of one-bedroom apartment cannot be more than $800.
a) Present the situation on the graph below by showing the equilibrium and the effect of the price ceiling on the one-bedroom market.
b) What will be the consequence of the price ceiling in this market?
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Rent
1,000
800
QE Quantity of apartments
Exercise 2 Suppose U.S. oil market is represented by the following
a) Using this demand curve on the graph, determine the revenue when the price is $18 and when the price is $16.
b) Discuss the revenue of oil when a price drop from $18 to $16?
c) Using the effect of total revenue of oil, discuss the elasticity of demand when a price drop from $18 to $16.
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160
20
24
16
18
120100 14060 80
0
40
P ri c e
Quantity�fy�ily(Th�usandsy�fyBarrelsy§erydat)
SUS
DU
SQ
P
Student Name:_________________________________
Exercise 3 Ali earns $200 a week which he spends entirely on Zaxbys salad and Orange Juice. The price for a bowl of the salad is $5 and the price for the bottle of orange juice is $2.
a) Draw Ali's budget constraint. b) Suppose the price of the salad increases to $8 per bowl, what will happen to Ali's budget
constraint? Show that on the graph
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Salad
40
35
100
30
25
20
25
10
25 50 50 Orange Juice