Question

6. Draw a graph to illustrate each of these situations a. "Christine gets a call that her son was seriously injured on a hiking trip in Colorado and is in the intensive care unit of a Denver hospital. Christine lives in Boston." Draw Christine's demand curve for an airline ticket from Boston to Denver today. b. "You sell rare and antique coins at flea markets. Today you are selling at a booth in Burlington, VT. A bus filled with tourists arrive and many are very, very interested in purchasing your coins." Draw your supply curve for rare and antique coins todays. c. "l refuse to ever spend any more than $15 for a bottle of wine, and at that price lI will buy wine to drink, make vinegar, use it to cook, and use it for gifts.

Answer 1

a. Because her son has just been in an accident, her demand for airline tickets will not be sensitive to price. Basically, she might be willing to buy the airline ticket an any price. So her demand curve will be very very steep- almost vertical.

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b. Knowing that you have a bunch of buyers coming to buy a rare product- You'll have a very steep supply curve. It will also be almost vertical since slight changes in your price will not allow you to adjust the quantity that you can offer by a lot (you surely cannot produce more antique coins).

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c. Here you're saying that your demand for wine will be 0 at a price above $15, but it will be little higher at $15- since you plan on using it for many things. At this price, you may buy 1, 2, 3 or more bottles of wine. Finally, as the price of wine decreases below $15, surely the law of demand kicks in, and the demand for wine increases even more. (I've used dotted lines to draw the demand curve as I'm assuming bottles of wine are discrete).