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1.  Fill in the blanks in the following sentence: The supply and demand for a good determine both the _________ and ___________ at which the good is sold.

 

1.  Fill in the blanks in the following sentence: The [[supply and demand]] for a good determine both the _________ and ___________ at which the good is sold.

:price and quantity.

:price and quantity.

:P = $18

:P = $18

We can check this answer by plugging P into the other equation and making sure we get the same value for Q:

We can check this answer by plugging P into the other equation and making sure we get the same value above of Q=12:

:P = $6 + Q

:P = $6 + Q

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 or service increases, such as more people driving cars that need gasoline (refined oil), what happens to the market price of oil?  Explain.

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 or service increases, such as more people driving cars that need gasoline (refined oil), what happens to the market price of oil?  Explain.

:Greater supply of oil means less scarcity, more competition, and a need by the sellers to lower the price to sell its goods.  So the market price decreases.  When the demand increases for a good, here is greater scarcity and the sellers can raise their prices.

:Greater supply of oil means less scarcity, more competition, and a need by the sellers to lower the price to sell their goods.  So the market price decreases.  When the demand increases for a good, there is greater scarcity and the sellers can raise their prices.

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.

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.

(A) Given the above supply and demand (you might find it easier to graph it), how many "obstructed view" bleacher seats did the New York Yankees build, and how much does the team make from sales of "obstructed view" tickets at each game?

(A) Given the above supply and demand (you might find it easier to graph it), how many "obstructed view" bleacher seats did the New York Yankees build, and how much does the team make from sales of "obstructed view" tickets at each game?

The price and quantity are where supply equals demand, which according to the table is at P=$15 and Q=300.  Total revenue is then P times Q, which is $9000.

The price and quantity are where supply equals demand, which according to the table is at P=$15 and Q=600.  Total revenue is then P times Q, which is $9000.

<br>(B) Suppose the City of New York passed a law for a maximum price (a "price control") of $2 per "obstructed view" bleacher ticket, because politicians felt that fans should not pay more if they do not get a full view of the field.  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?

<br>(B) Suppose the City of New York passed a law for a maximum price (a "price control") of $2 per "obstructed view" bleacher ticket, because politicians felt that fans should not pay more if they do not get a full view of the field.  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?

6.  Suppose you own a restaurant, and your average customer spends $10.  Suppose further that your marginal cost for each customer is $5.  But in addition you have costs of $20 per hour in electricity and wages.  From 6-7pm each night, you usually have about 40 customers, but then it decreases by 50% each hour thereafter as it gets later in the evening.  At what time do you close your store for the night?  Explain your answer.

6.  Suppose you own a restaurant, and your average customer spends $10.  Suppose further that your marginal cost for each customer is $5.  But in addition you have costs of $20 per hour in electricity and wages.  From 6-7pm each night, you usually have about 40 customers, but then it decreases by 50% each hour thereafter as it gets later in the evening.  At what time do you close your store for the night?  Explain your answer.

:

:6-7pm: profit is 40 customers times $5 each=$200, minus $20 per hour = $180 STAY OPEN

7.  Explain ''why'' waiting lists develop in countries (like Canada) 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.)

7.  Explain ''why'' waiting lists develop in countries (like Canada) 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.)

:

:Price controls (fixed prices) cause the supply to decrease because the sellers cannot make as much as in the free market.  If the price controls are much lower than the free market price, then many sellers may go out of business.  In the case of medical prices, the price controls discourage people from practicing medicine or providing medical services.  So there is not enough, and demand is greater than supply.  The lower price, due to the Law of Demand, causes the demand to increase, which makes the shortage even worse.  As a result of the shortage, waiting lists exist.