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1. Hurricane Katrina increased housing demand in Baton Rouge, shifting the demand curve right and increasing prices. Later, as people returned to New Orleans, demand fell and supply rose, shifting curves in the opposite direction. 2. A decline in bee populations decreased ice cream ingredient supply, shifting the supply curve left and lowering quantity while raising prices. 3. A meal voucher program doubled Mr. Binh's consumption from 1 to 3 meals per month due to lower prices, showing elastic demand. His unchanged income meant total expenditure was consistent with the demand change. 4. Predictions are made about equilibrium apartment prices increasing with higher college enrollment boosting demand by 15%, and steel

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8 views3 pages

Topic 3

1. Hurricane Katrina increased housing demand in Baton Rouge, shifting the demand curve right and increasing prices. Later, as people returned to New Orleans, demand fell and supply rose, shifting curves in the opposite direction. 2. A decline in bee populations decreased ice cream ingredient supply, shifting the supply curve left and lowering quantity while raising prices. 3. A meal voucher program doubled Mr. Binh's consumption from 1 to 3 meals per month due to lower prices, showing elastic demand. His unchanged income meant total expenditure was consistent with the demand change. 4. Predictions are made about equilibrium apartment prices increasing with higher college enrollment boosting demand by 15%, and steel

Uploaded by

Phương Huyền Hoàng
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Hoàng Phương Huyền

Nộp bài cá nhân

Multiple choice

1.A 2.D 3.A 4.C 5.D 6.C

Case 1

a) + Hurricane Katrina effect => increasing the population in Baton Rough => increasing the demand of
homes => the demand curve shifts to the right

+ Since the homes listed for sale in the city is ceteris paribus, while the population increased significantly
which makes this number of homes decrease by 3100 (from 3600 to 500). Due to the scarcity of housing,
the price increased by $26000 (from $130000 to $156000)

 The equilibrium point moves up from P(E) to P(E’)

b) + Five years after Hurricane Katrina, half the people who had relocated to Baton Rouge move back to
a rebuilt New Orleans => declining in the population in Baton Rough => declining in the demand of
housing, while the number of houses supplied is constant => increasing in the supply => the demand
curve shifts to the left => the supply curve shifts to the right.
Hoàng Phương Huyền
Nộp bài cá nhân

Case 2

+ The decline of bee population and pollination => decreasing in the supply of ingredients for ice cream
=> higher prices for ingredients => price increases => demand decreases

 The supply curve shifts to the left


 The demand curve shifts to the left

Case 3

a) The initial price of meal is $10 (P1 = 10$/meal) and Mr Binh dined out once a month (Q1=1), and
after a voucher system giving patrons two meals for the price of one, Mr Binh dined out three
times a month => P2 = 5$/meal, Q2 = 3

+ Percentage change in price: %∆P = ∆P/P1 x 100 = -5/10 x 100 = -50%

+ Percentage change in quantity: %∆Q = ∆Q/Q1 x 100 = 2/1 x 100 = 200%

 Ep = %∆Q/%∆P = 4 > 1 => Elasticity


b) The income of Binh is ceteris paribus. With promotional vouchers, the price of meals is lower =>
the times that Binh dined out increases from 1 to 3 times per month => increasing in demand
(according to the law of demand)
- The change in total expenditure will be consistent with the value of demand if other factors are
remained stable (Ceteris Paribus).

Case 4
a) + Epd = 1; P= $400; Q= 1000 with Epd = Q’p.P/Q = - 1/b.P/Q
 b = 0,4 (b>0)

+ P = a – bQd => a = 800 => P = 800 – 0,4.Qd

+ Eps = 0,5; P = $400; Q = 1000 with Eps = Q’p.P/Q = 1/d.P/Q

 d = 0,8
Hoàng Phương Huyền
Nộp bài cá nhân

+ P = c + dQs => c = -400

 P = -400 + 0.8Qs

+ Qe = Qs = Qp = 1000 => Pe = 400

b) + An increase in college enrollment is expected to increase the demand for apartments in


college town by 15 percent => % Q = 15% => Percentage in equilibrium price is 0,1 -> 10%
c) Predict : Increase in demand -> the equilibrium price of apartments increases

Case 5

Percentage change in equilibrium price : % Qs/(Es + Ed) = 8%

 The new price of steel is: P’= $108

When import restrictions on steel reduce the supply of steel by 24%, the equilibrium price of steel
increases (it increases from $100 to $108).

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