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).

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.

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.

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?

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.

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)

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)

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.

9. Relate the supply and demand curves to the basic economic concept of scarcity. For a good that has no scarcity, such as air, are there any supply and demand curves that are meaningful? Discuss.

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

11. How are the forces of supply and demand and the free market helpful to someone who might otherwise be an social outcast and victim of prejudice in a community? In addition or alternatively, discuss the social benefits of a "free market" more generally.

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)