04 Jun 1. Assignment Questions Question 1– 10 marks The table sets out the demand and supply schedules for banana.
Question
1. Assignment Questions
Question 1– 10 marks
The table sets out the demand and supply schedules for banana.
Price
(dollars per box)
Quantity
demanded
Quantity
supplied
(boxes a week)
6
500
4000
5
1000
3500
4
1500
3000
3
2000
2500
2
2500
2000
1
3000
800
(a) Draw a graph of the market forbanana. What are the equilibrium price and quantity? Explain why. (2 marks)
(b) If the price of banana was $1.50 a box. What would be the situation in the banana market (shortage or surplus)? Explain why and how the price and quantity would adjust. (2 marks)
(c) Suppose a cyclone destroyed some banana farms in QLD and the quantity of banana supplied decreased by 500 boxes a week at each price. Explain what would happen to the market supply and demand and how would the equilibrium price and quantity adjust? Illustrate the changes on your graph. (3 marks)
(d) Suppose a cyclone decreased banana supply by 500 boxes a week at each price. But at the same time the demand for banana increased by 500 boxes a week at each price. Explain what would happen to the market equilibrium price and quantity? Illustrate the changes on your graph. (3 marks)
Text box: price
(dollars
per chip) quantity demanded
(millions of
chips per year)
200 50
250 45
300 40
350 35
400 30
Question 2– 10 marks
The demand schedule for computer chips is in the table.
(a) What happens to total revenue if the price falls from $400 to $350 a chip and from $350 to $300 a chip? Explain your answer. (1 marks)
(b) At an average price of $300, is the demand for chips elastic, inelastic, or unit elastic? Explain your answer using the total revenue test.(2 marks)
When Rie’s income was $3,000, she bought 5kgs of rice and 2kgs of beef a month. Now her income is $4,000 and she buys 4kgs of rice and 3kgs of beef a month.
(c) Calculate Rie’s income elasticity of demand for beef. Show your calculation. (1 marks)
(d) Calculate Rie’s income elasticity of demand for rice. Is rice normal good or inferior good? Show your calculation. (2 marks)
Suppose a drought cuts the quantity of wheat grown by 3 per cent.
(e) If the price elasticity of demand for wheat is 0.3, by how much will the price of wheat rise? Show your calculation.(1 marks)
(f) If pasta makers estimate that this change in the price of wheat will increase the price of pasta by 20 per cent and decrease the quantity demanded of pasta by 5 per cent, what is the pasta makers’ estimate of the price elasticity of demand for pasta? Show your calculation.(1 marks)
(g) If pasta sauce makers estimate that, with the change in the price of pasta, the quantity of pasta s
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