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Economics 301 Assignment #1 (Show All Your Work!)

This document contains an economics assignment with multiple questions regarding demand and supply functions and equilibrium price and quantity calculations. It includes sample demand and supply equations and asks the student to find equilibrium points, calculate price elasticities, and analyze the effects of price ceilings and excise taxes.

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Matt Mickolichek
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30 views4 pages

Economics 301 Assignment #1 (Show All Your Work!)

This document contains an economics assignment with multiple questions regarding demand and supply functions and equilibrium price and quantity calculations. It includes sample demand and supply equations and asks the student to find equilibrium points, calculate price elasticities, and analyze the effects of price ceilings and excise taxes.

Uploaded by

Matt Mickolichek
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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UW-River Falls

College of Business and Economics


Name Matt Mickolichek
Row # ______

Dr. P. Ngoboka
Economics 301
Assignment #1
1.

(Show all your work!)

Assume the following demand and supply functions:


Qd = 60 - 2P
Qs = -12 + 4P
(a) What are the equilibrium price and quantity?
Qd=Qs = 60 2P = -12 + 4P = 72 = 6P = P = 12
Plug in P = Q = 60 2(12) = 36
P=12,Q=36
(b) Assume that supply shifts to
Qs = -24 + 4P.
What are the new equilibrium price and quantity?
60 2P = -24 + 4P = 84 = 6P = P = 14
Q = 60 2(14) = 32
P=14,Q=32

2.

The following are the demand and supply functions of a


hypothetical product.
Qd = -.6P + 8
Qs = .4P -2
(a) Find the equilibrium price and quantity.
-.6P + 8 = .4P 2 = 10 = P
Q = .4(10) 2 = 2
P=10,Q=2
(b) Calculate the price elasticity of (i) demand and (ii) supply at
the equilibrium point.

-23.

The following are the demand and supply function for


beer.
Qd = 25 - P
Qs = -20 + 4P (P = price/barrel).
(a) What are the equilibrium price and quantity?
25 P = -20 + 4P = 45 = 5P = P = 9
Q = 25 (9) = 16
P=9,Q=16
(b) Is the demand for beer elastic or inelastic?
(Hint: Compute price elasticity of demand at equilibrium!)

(c) Suppose a price ceiling is imposed by the government at


$8.00/barrel.
( i)

What is the new quantity sold?


Qs = -20 + 4(8) = 12

(ii)

Is there a shortage or surplus in this market?


much is the shortage or surplus?
Qs = 12
Qd = 25 8 = 17

How

There is a shortage of 5.
(d) If the government imposes an excise tax of $4.00/barrel on
beer,
( i)

What is the effect of the excise tax? (Hint:


the new equilibrium price and quantity.)

Compute

(ii)

How much tax revenue does the government collect?

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