Question

1. Suppose we have the following market supply and demand schedules for bicycles:

   1. 1.1. Plot the supply curve and the demand curve for bicycles.

   2. 1.2. What is the equilibrium price of bicycles?

   3. 1.3. What is the equilibrium quantity of bicycles?

   4. 1.4. If the price of bicycles were $100. Is there a surplus or a shortage? How many units of surplus or shortage are there? Will this cause the price to rise or fall?

   5. 1.5. Ifthepriceofbicycleswere$400, is there a surplus or a shortage? How many units of surplus or shortage are there? Will this cause the price to rise or fall?

   6. 1.6. Supposethatthebicyclemaker'slaborunionbargainsforanincreaseinitswages.Furthermore, suppose this event raises the cost of production, makes bicycle manufacturing less profitable, and reduces the quantity supplied of bicycles by 20 units at each price of bicycles. Plot the new supply curve and the original supply and demand curves. What are the new equilibrium price and quantity in the market for bicycles?

PRICE	QUANTITY DEMANDED	QUANTITY SUPPLIED
$100	70	30
200	60	40
300	50	50
400	40	60
500	30	70
600	20	80

Answer 1

Bua Quonhy 40 2D deundond Curir b tesechun L fulb Occu at the at E) at the Hewe egulibrium pme 50 bcyalns an bregele st yppled 2 30 ht 31ae ay demanbd> ayppled shetege Thee i u 40 7o-3 - 8aplyhnga Demard thhge egultbm puint This nll ineseslc

biyeles and e of4 ghy demaade d 4 1- SAa byelea ppld Sine ry denasdad dppled Sples ple Sy ple be -40 Sepplydemaad ephes paint This teall deeeade the priu till the eubem dinand hy a pp CNe) Pria 20 So 30 40 40 40 Suo 30 So 4 20 Jo 2 6 30 NCus New eguulhbrion 40 tiyeleo.