Exam 2: Supply and Demand

Suppose that the long-run world demand and supply elasticities of crude oil are -0.906 and 0.515,respectively.The current long-run equilibrium price is $30 per barrel and the equilibrium quantity is 16.88 billion barrels per year. a.Derive the (linear)long-run demand and supply equations. b.Suppose the long-run supply curve you derived above consists of competitive supply plus the quantity of OPEC supply.If the long-run competitive supply (not including OPEC's production)is: QS = 7.78 + 0.29p, what must be OPECʹs level of production in this long-run equilibrium to maintain the price of $30?

-The above figure shows a graph of the market for pizzas in a large town.No pizzas will be supplied unless the price is above

The tax incidence of a specific tax or ad valorem tax is influenced by

Which of the following is most likely to be true?

The cross price elasticity of demand for a good is the percentage change in the quantity demanded in response to a given percentage change in

If the demand curve for a good is unit price elastic and the supply curve is perfectly price elastic,a $1 specific tax imposed on the sellers of this good will

The price elasticity of supply when the supply curve is Q = 5 is

The percentage change in the quantity supplied in response to a percentage change in the price is known as the

For the following, please answer "True" or "False" and explain why. -If a good is not produced,then there is no demand for it.

Municipalities that have adopted the policy of "rent control" typically set the rentals on certain apartments well below equilibrium.As a result,

Suppose that the current price of oil is $60 per barrel and the quantity sold is 90 million barrels per day.The current estimates of the price elasticity of supply and demand are η=1 and ε=-.2 respectively.What will be the effects on the market price and quantity if the U.S.government suddenly decides to purchase an additional 2 million barrels of oil? Assume that the supply and demand curves are linear and the addition consumption of oil by the government results in a parallel shift of the supply curve to the left by 2 million barrels per day.

Suppose the demand function for a good is expressed as Q = 100 - 4p.If the good currently sells for $10,then the price elasticity of demand equals

If a consumer doubles her quantity of ice cream consumed when her income rises by 25%,then her income elasticity of demand for ice cream is

What happens to the equilibrium price and quantity of coffee when there is a leftward shift of the supply curve for tea? Explain.

For the following, please answer "True" or "False" and explain why. -During the winter of 1997-1998,the northeastern United States experienced warmer than usual conditions.The price of home heating oil was less than it was during the previous winter,but people bought less home heating oil.This contradicts the Law of Demand.

Technological innovation in the production of computers has led to

Consumers and firms are known as price takers only if

Suppose that the supply and demand of wheat depend on the price of wheat (p),the amount of annual rainfall (r),and the level of disposable consumer income (I).The equations describing the supply and demand curves are given by: QS = 20r + 100p QD = 4000 - 100p + 10I Sketch a graph of the supply and demand curves for wheat and show the effects of an increase in the quantity of rainfall.How does each curve shift (if at all)from the increase in rainfall? What does this shift do to the equilibrium price and quantity (increase/decrease)?

Explain why the supply-and-demand model should not be used to analyze the market for jeans.

The supply and demand for wheat are given by QS= 20 + 100p QD = 4000 - 100p +10Y Where Y is the average consumer income. a.Compute the partial derivative of quantity demand with respect to changes in average consumer income. b.Solve for the equilibrium price and quantity as functions of the consumer income. c.Compute the derivatives of the equilibrium price and quantity with respect to income.