Economics Homework Two - Model

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).

... quantity ... price .... (Alexander)

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)?

Given: P= 30-Q; P= 6+Q. So, P=P, and 30-Q = 6+Q, which equals 12. So, Q=12. Inserting this answer back into the first original equation (P= 30-Q) gives me, P=18. So, the Quantity is 12 and the Price is $18. (Trisha)

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.

When the supply of a good such as oil increases, the price decreases, as sellers have a greater quantity than usual to sell, and not enough people will purchase it if the price remains steady, resulting in unsold oil. If the demand increases, the price will rise, as people are willing to pay more for what there is, as there is not enough to go around. (Duncan)

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.

No one wants to buy rotten fruit. A grocery store reduces the price of their fruit when they have an oversupply. As a result, people buy their fruit faster so they don’t rot and go to waste. The result is that due to the downward slope of the demand curve the fruit will sell faster. (James)

A lowered price creates a higher demand. More people are willing to pay $0.99 a pound for grapes than are willing to pay $1.50 a pound. So more people begin buying the grapes, which causes the supply to go down, thereby solving the grocery stores problem of an oversupply of fruit. (Michelle)

The grocery store needs to sell out the grapes before they go bad; bad grapes don’t make much profit. Looking at the supply and demand curve, you will see that when the supply expands to the right, the new equilibrium between the demand and supply is a lower price. By lowering the price on the grapes, their chances of selling them fast go up because more people will want to buy the grapes at the cheaper price. The new price exists as long as there is an oversupply of grapes, or until the seller’s marginal profit falls to zero. (Lucy)

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?

They made 600 "obstructed view" bleacher seats, and they make $3000 at each game. (Timothy)

(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?

Yes, the tickets will sell out unless you have more than 1000 seats. Yes, you will have to wait in line because demand exceeds supply. I would oppose such a law because it doesn’t go along with the free market. (Mark)

I am in favor of the idea of lowering the prices of the obstructed view tickets because most people don’t want a seat with an obstructed view. Those people will continue buying regular tickets. Selling the two dollar tickets would give more poor fans an opportunity to see the game and experience all the other benefits of going to a ball game, even if their view is obstructed. There may be long lines to get the tickets, but first come, first served would be a fair way to sell them. (Steve)

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.

Money is a measure of worth. Your time has value, both in use, and in exchange. Why? Because while you are, lets say, stuck in traffic on the way to a class, you could have been finishing homework, which have freed up time to do more work, or given you time to use at a job. So that time had value in use for things you could have been doing. Time is needed to do anything that makes money. (Michelle)

The phrase “Time Is Money” was recited by Benjamin Franklin in 1748. Ever since it has been a popular concept that Americans use and hear daily. This statement refers to wasted time as wasted money. If one sits around doing nothing when he could be out in the world making money he is wasting his time which leads to a result of wasted money. As Benjamin Franklin says, “He that can earn ten shillings a day by his labor, and goes abroad, or sits idle, one half of that day, though he spends but sixpence during his diversion or idleness, ought not to reckon that the only expense; he has really spent, or rather thrown away, five shillings. Remember, Time Is Money." (Amanda)

The "free market" is so much more powerful than even the wealthiest person because it is influenced by millions of people not just one. (Kate)

A good definition for "free market" is a market influenced by supply and demand alone. (Anthony)

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.)

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, because the demand is greater then the supply. More people would be able to afford medical treatments, but the doctors wouldn't make as much money so they wouldn't do as many of the treatments so waiting lists would develop. Also people wouldn't want to be doctors because it wouldn't pay as much as it did before the law was passed. (Seth)

Demand exceeds supply. When more people can go to the hospital for little or no money, they will. You'll end up with people going for a cold, because they can. (Anna)

Waiting lists sometimes develop in countries like Canada and England because the government sets a fixed price for medical services. Since doctors aren't paid as much in these countries as they are here, fewer people become doctors, and there are not enough to take of everyone who needs help. (Mary)

In countries such as Canada or England where the government sets the price of healthcare lower than the market price, the supply of healthcare is lower than the demand, therefore creating waiting lists and a shortage. (Josh)

Honors

Write an essay of about 300 words total on one or more of the following topics:

8. Discuss the effect of supply and demand and the Tyndale Bible.

... [There was] an increase in the demand for teh Tyndale Bible and in the profit for the printers. Since the profit of the printers increased, they could afford to make more copies of the Tyndale Bible, as a a result, more of the laymen were able to get a copy. This made it virtually impossible to censor the Tyndale bible and it eventually was made legal in 1573. ... (Dermot)

10. Discuss any aspect of the economics of health care.

Basically, there are problems with healthcare: premiums and actual care both cost too much, and they are rising in price. Right now, some people have insurance and get the care they need, while others do not have insurance and cannot get care. However, under a government system, nothing would really change; everyone would have insurance in name, but many would still be unable to get their care because of rationing.

What must be done is first to figure out why insurance and care prices are rising. One reason is malpractice lawsuits. Another is government regulation. Another is lack of interstate competition. Due to these and other factors, when you go to the doctor you are not actually paying the price of drugs or procedures, but those prices with countless other fees piled on top.

Government claims it needs to get into the insurance business to keep insurance companies honest. However, it is due much to government stifling of competition among insurance companies that prices are so high to begin with. What will really make insurance affordable is serious tort reform, a handful of federal regulations (especially no preexisting conditions) which facilitate interstate competition, and tax cuts or subsidies for low-income consumers. I once heard a congressman say that insurance companies are acting like a monopoly. Everyone knows monopolies are inefficient because they do not have to compete with anyone else. Introducing competition into the insurance industry will drive down price and drive up quality- the opposite of what the government plans will do. (Addison)

12. Compare "equilibrium" in economics to "equilibrium" in other fields (such as chemistry or physics) or in life itself (such the flow of traffic on highways), using specific examples.

Equilibrium in economics is when the supply meets the demand. It is the perfect balance in the economic world. The right amount of shirts in a store is considered equilibrium because the amount of shirts that people want to buy meets the amount of shirts they have in the store. Equilibrium in biology is the balance within a living organism. The human body is made up of all different parts which are in their own way very important. For example, if one of the organs in our body did not function correctly, we would not be able to survive. The body would be unbalanced and certain bodily functions would not be completed. We could not substitute it with a totally different organ. It would not work because the perfect balance would not be maintained. We were made perfect for our task in the world and if we tamper with that, everything would go wrong. (Veronika)