Econ 2000 Tutorial
THE UNIVERSITY OF THE WEST INDIES
ST. AUGUSTINE
FACULTY OF SOCIAL SCIENCES
DEPARTMENT OF ECONOMICS
ECON2000: INTERMEDIATE MICROECONOMICS I – 2012/13
TUTORIAL SHEET 1
THE THEORY OF CONSUMER BEHAVIOUR
PROBLEMS
1. The following data represent 5 points on the supply curve for orange juice:
PRICE ($ PER GALLON) QUANTITY (MILLIONS OF GALLONS)
1 100
2 300
3 500
4 700
5 900 and these data represent 5 points on the demand curve for orange juice:
PRICE ($ PER GALLON) QUANTITY (MILLIONS OF GALLONS)
1 700
2 600
3 500
4 400
5 300
a. Graph the points of these supply and demand curves for orange juice. Be sure to put price on the vertical axis and quantity on the horizontal axis.
b. Do these points seem to lie along two straight lines? If so, figure out the precise algebraic equation of these lines. (Hint: If the points do lie on straight lines, you need only consider two points on each of them to calculate the lines.)
c. Use your solutions from part b to calculate the ‘‘excess demand’’ for orange juice if the market price is zero.
d. Use your solutions from part b to calculate the ‘‘excess supply’’ of orange juice if the orange juice price is $6 per gallon.
2 Marshall defined an equilibrium price as one at which the quantity demanded equals the quantity supplied.
a. Using the data provided in problem 1.1, show that P = 3 is the equilibrium price in the orange juice market.
b. Using these data, explain why P = 2 and P = 4 are not equilibrium prices.
c. Graph your results and show that the supply demand equilibrium resembles that shown in Figure 1.3.
d. Suppose the demand for orange juice were to increase so that people want to buy 300 million more gallons at every price. How would that change the data in problem 1.1? How would it shift the demand curve you drew in part c?
e. What is the new equilibrium price in the orange juice market, given this increase
ST. AUGUSTINE
FACULTY OF SOCIAL SCIENCES
DEPARTMENT OF ECONOMICS
ECON2000: INTERMEDIATE MICROECONOMICS I – 2012/13
TUTORIAL SHEET 1
THE THEORY OF CONSUMER BEHAVIOUR
PROBLEMS
1. The following data represent 5 points on the supply curve for orange juice:
PRICE ($ PER GALLON) QUANTITY (MILLIONS OF GALLONS)
1 100
2 300
3 500
4 700
5 900 and these data represent 5 points on the demand curve for orange juice:
PRICE ($ PER GALLON) QUANTITY (MILLIONS OF GALLONS)
1 700
2 600
3 500
4 400
5 300
a. Graph the points of these supply and demand curves for orange juice. Be sure to put price on the vertical axis and quantity on the horizontal axis.
b. Do these points seem to lie along two straight lines? If so, figure out the precise algebraic equation of these lines. (Hint: If the points do lie on straight lines, you need only consider two points on each of them to calculate the lines.)
c. Use your solutions from part b to calculate the ‘‘excess demand’’ for orange juice if the market price is zero.
d. Use your solutions from part b to calculate the ‘‘excess supply’’ of orange juice if the orange juice price is $6 per gallon.
2 Marshall defined an equilibrium price as one at which the quantity demanded equals the quantity supplied.
a. Using the data provided in problem 1.1, show that P = 3 is the equilibrium price in the orange juice market.
b. Using these data, explain why P = 2 and P = 4 are not equilibrium prices.
c. Graph your results and show that the supply demand equilibrium resembles that shown in Figure 1.3.
d. Suppose the demand for orange juice were to increase so that people want to buy 300 million more gallons at every price. How would that change the data in problem 1.1? How would it shift the demand curve you drew in part c?
e. What is the new equilibrium price in the orange juice market, given this increase