Question

1. Analyze the impact of a decrease in tariffs (taxes) on imported flat screen televisions in the market for flat screen televisions.
2. In 2014, the Seattle Seahawks won the Super Bowl.  Draw a supply and demand graph for Seahawk tickets in the following season to show the impact of the Super Bowl win.  (It would be the same graph for Seahawks t-shirts or hotdogs and beer at the game.)
3. Suppose that (a) it is reported that coffee helps students retain information and (b) the cost of growing coffee beans increases. Draw a supply and demand graph to show the impact on price and quantity. What happens to price? What happens to quantity?  (Be careful with the quantity answer.)
4. What is a government price floor?  Who benefits from the floor?  Who pays the cost of the floor?
5. Given the equations for demand and supply below, solve for the equilibrium price P* and quantity Q*.  Show your work.  (The steps for solving supply and demand equations are shown at the end of Lecture 3 on supply and demand.)

                        Demand:   Q(d) = 1000 – 100P          

Supply:     Q(s) = 100 + 200P

8. Suppose that you are currently charging $10 for your product and selling 10,000 items.  Calculate your total revenue.  If you increase your price to $11, you estimate that you will sell 8,000 units.  Calculate your total revenue.  Calculate the price elasticity of demand.

Answer 1

(1) Lower tax on imported TV will decrease the price of imported TVs, so market supply will increase, shifting market supply curve rightward. Price will increase and quantity will decrease.

In following graph, D0 & S0 are initial demand and supply curves intersecting at point A with initial price P0 and quantity Q0. When S0 shifts right to S1, it intersects D0 at point B with lower price P1 and higher quantity Q1.

(2) When Seahawks wins a game in current season, it will increase the demand for Seahawks games tickets in next season, shifting its demand curve to right. Both the price and quantity of tickets will increase.

In following graph, D0 & S0 are initial demand and supply curves for Seahawks tickets, intersecting at point A with initial price P0 and quantity Q0. Higher demand will shift D0 rightward to D1, intersecting S0 at point B with higher price P1 and higher quantity Q1.

NOTE: As per Answering Policy, 1st 2 questions are answered.