Question

9/19/2019 Print - Principles of Macroeconomics Section 03G Fall 2019 CO

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Unit 2 Problem Assignment - Due Sep 20, 2019 11:59 PM

Principles of Macroeconomics Section 03G Fall 2019 CO

Problem Assignment Unit 2 ASSIGNMENT INSTRUCTIONS:

Students are required to answer all the questions and sub-questions of the

assignment. Please show all your work - graphs, formulas, and calculations

(wherever necessary) to receive full credit. Just showing the final answer to a

question will lead to a grade of zero.

1.(50 points) Consider the market for coffee.

1. Draw the supply and demand graph for coffee below assuming the

market operates at an equilibrium price of $2.40 and an equilibrium

quantity of 5,000.

2. Assuming tea and coffee are substitutes, what will happen in the

market for coffee if the price of tea increases? Show the effects on

your market.

3. Based on this information, will producer surplus in the market for

coffee increase or decrease? Explain.

2. (50 points) Consider the market for basketball sneakers, which is drawn

below. Answer each of the following questions.

9/19/2019 Print - Principles of Macroeconomics Section 03G Fall 2019 CO

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1. If this market operates at equilibrium, what areas represent the

consumer surplus that will occur?

2. If this market operates at a price of $61, how many units will producers

sell?

3. If the price is $260, how many units will be produced, but not actually

sold?

4. If this market operates at a price of $80, what areas represent the

producer surplus that will occur?

5. If this market operates at a price of $80, what areas represent the

consumer surplus that will occur?

6. Now, suppose the government requires that all units sold in the market

must be sold at a price of $400. How many consumer surplus will occur

given this new market price?

9/19/2019 Print - Principles of Macroeconomics Section 03G Fall 2019 CO

https://go.view.usg.edu/d2l/le/calendar/1866381/event/7750471/detailsview#7750471 3/3

Unit 2 Problem Assignment

Due September 20 at 11:59 PM

Once you have completed this assignment, please save it in .doc, .docx or

RTF format and upload it through the Unit 2 Problem Assignment folder.