Economics Homework Two Answers - Student Ten

1. The supply of a good, and the demand for that good, determine both the ______ and ______ at which the good is sold (assuming it is a free market). Price and quantity

Correct.

2. Suppose the price demand curve for a particular good is P = $30 - Q, where P is the price and Q is the quantity. Also suppose the price supply curve is P = $6 + Q. At which price and quantity will the good be sold (assuming a free market)? P=24 and Q=12

Q is right but P is wrong. Plug your value of Q back into the equations and see what P is. (Minus 1).

3. When the supply of a good or service increases, such as increasing the number of oil wells, what happens to the market price of oil? Explain. When the demand for a good a good or service increases, such more people driving cars that need gasoline (refined oil), what happens to the market price of oil? Explain. Price goes down. Example: if the US drilled for oil the price would probably drop world wide.

Correct, but incomplete because it does not answer what happens when demand increases. (Minus 1).

4. Why do grocery stores lower the price of their fruit (such as grapes) when they have an oversupply of ripened fruit? Explain by citing the downward slope of a demand curve, and describe what happens to this fruit after the grocery store lowers its price. Grapes are perishable and the value goes down the older they get, so a store needs to live by "carpe diem". If the price is lowered the intercept point for price and quantity is moved to the right, so more grapes will sell, according to the graph.

Right, except that the intercept point moves to the right and down. Price is on the y-axis.

5. When the New York Yankees built their new $1.5 billion ballpark, they made a decision about how many "obstructed view" bleacher seats to include. Due to the design of this new stadium, people sitting in these bleacher seats could not see all of the field because part of the stadium structure blocks part of their view. Here is what the supply and demand are for those obstructed-view seats: Quantity of "Obstructed-View" Tickets Demand Price/Ticket Supply Price/Ticket 300 $10 $3 600 $5 $5 900 $3 $7 1000 $2 $9

(A) How many "obstructed view" bleacher seats did the New York Yankees build, based on the above data, and how much does the team make from sales of these tickets at each game? (B) Suppose the City of New York passed a law for a maximum price (a "price control") of $2 per "obstructed view" bleacher ticket. Will the obstructed-view seats sell out under this law, and will people have to wait in line in order to buy them? Would you oppose or support such a law, and why? A. 300; $7.00/ticket

B. Yes; yes; yes; but only if they passed a law that you must buy at lest 7 hot dogs and 5 sodas, so that the Yankee stadium doesn't go out of business. Remember "there’s no such thing as a free lunch".

(A) is wrong. The price is where supply equals demand: $5. The overall sales is then $5 times 600 equals $3000. (Minus 1). Second part is good with a witty addition.

6. "Time is money." Explain. Or, as an alternative, improve on our definition of a "free market." Or, as a third alternative, explain how the free market is so much powerful than even the wealthiest people in the world. you can lead a horse to water but you can’t make it drink". In a truly free market, without government control, people will only buy what they want, regardless of who or how rich a person is that tries to force them otherwise. The government by threat of jail is really the only one who can force people to buy, but this would not be a free market.

Excellent, could use as a model answer.

7. Explain why waiting lists develop in countries (like Canada and England) where the government prohibits anyone from charging more than fixed prices for medical services, assuming that these fixed prices are lower than what the prices would be under supply and demand in the free market. (Hint: the reason is related to the effect of price controls on the supply of a good or service.) if doctors are making hardly any profit, they will do less surgeries because it isn’t worth there time. This will cause a shortage and the waiting line will get longer. The medical suppliers will start limiting their services just like the bleachers of the obstructed view boxes at Yankee stadium.

Excellent, may use as a model.

67/70. Good work with some terrific answers.--Andy Schlafly 12:47, 20 September 2009 (EDT)

[[''''''Aran M.'''''']]