Microeconomics

Student Name: A Number:

Principles of Microeconomics

Prof. Eberhard

Assignment #1

Due in Class week of February 3rd

Question #1: (10 marks)

Consider the below supply and demand graphical representation of the Tuna market:

a) Suppose the price of a can of tuna is $4.00 -- What is the quantity demanded? What is the quantity supplied? At this price, is there a shortage or a surplus? By what amount? (4 marks)

b) Suppose the price of a can of tuna is $ 2.00 -- What is the quantity demanded? What is the quantity supplied? At this price, is there a shortage or a surplus? By what amount? (4 marks)

c) What is the equilibrium price and quantity in this market? (2 marks)

Student Name: A Number:

Question #2 (14 marks)

a) Plot the above Supply and Demand curves based upon the data provided (6 marks)

b) What is the equilibrium price and quantity of potash? (2 mark)

c) How much potash would actually be purchased if the price was $290? (1 mark)

d) How much potash would actually be sold if the price was $370? (1 mark)

e) At a price of $290, is there excess supply or demand? How much? (2 marks)

f) At a price of $370, is there excess supply or demand? How much? (2 marks)

Student Name: A Number:

Question #3 (14 marks) Compute the price elasticities of demand between points A and B (answer line B), B and C (answer line C), C and

D (answer line D), and so on. Indicate whether demand is elastic (E), unit elastic (U), or inelastic (I). Be sure to use average prices and quantities when computing the percentage changes.

Point Price

Quantity

Demanded

Elasticity of demand (with prev.

price) Elastic, Inelastic, or Unit Elastic

A

35.00

410,000.00

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B

40.00

380,000.00

C

45.00

350,000.00

D

50.00

320,000.00

E

55.00

300,000.00

F

60.00

260,000.00

G

65.00

220,000.00

H

70.00

190,000.00