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Econ 201 - Chapter 2: Supply and Demand




Question;Econ 201;Chapter 2: Supply and Demand;1.The daily;demand for hotel rooms on Manhattan;Island in New York is given by the;equation;QD = 250,000 ?;375P. The daily supply of hotel rooms on;Manhattan Island is given by the equation QS;= 15,000 + 212.5P. Diagram these demand;and supply curves in price and quantity space.;What is the equilibrium price and quantity of hotel rooms on Manhattan Island?;2. Suppose a new discovery in;computer manufacturing has just made computer production cheaper. Also, the popularity and usefulness of;computers continues to grow. Use Supply;and Demand analysis to predict how these shocks will affect equilibrium price;and quantity of computers. Is there;enough information to determine if market prices will rise or fall? Why?;3. Historically, investors have;considered gold commodities to be a good investment to preserve wealth in times;of inflation. If investors are no longer;worried about inflation and gold demand decreases, what do you expect will;happen to gold prices? How would your;answer change if you learn that a recent gold mine discovery will increase the;supply of gold?;4.The demand for;packs of Pokemon cards is given by the equation At a price of $2.50;per pack, what is the quantity demanded?;At $5.00 per pack, what is the price elasticity of demand?;5.The monthly;supply of desktop personal computers is given by the equation At a price of $800;what is the price elasticity of supply?;6.Suppose that;the short-run world demand and supply elasticities for crude oil are -0.076 and;0.088, respectively. The current price;per barrel is $30 and the short-run equilibrium quantity is 23.84 billion;barrels per year. Derive the linear;demand and supply equations.;7.The market for gravel has been estimated to have these supply and;demand relationships;Supply P = 10;+ 0.01Q;Demand P = 100? 0.01Q;where P represents price per unit in dollars, and Q;represents sales per week in tons.;A);Determine the;equilibrium price and sales.;B);Determine the amount of shortage or surplus;that would develop at P = $40/ton;8. American Mining;Company is interested in obtaining quick estimates of the supply and demand;curves for coal. The firm's research;department informs you that the elasticity of supply is approximately 1.7, the;elasticity of demand is approximately -0.85, and the current price and quantity;are $41 and 1,206, respectively. Price;is measured in dollars per ton, quantity the number of tons per week.;a.;Estimate linear;supply and demand curves at the current price and quantity.;b. What impact would a 10% increase in demand;have on the equilibrium price and;quantity?


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