Exam 15: Equilibrium-Part A

Remember King Kanuta and his tropical island? The demand function for coconuts by his subjects on the island is D(p)= 1,200 -100p and the supply function is S(p)= 100p.The law used to be that any subject who consumed a coconut had to pay another coconut to the king.King Kanuta then ate all the coconuts he got.But now the king, apparently fed up with coconuts, decides to sell the coconuts that he collects in the local market at the going selling price, p_s.In equilibrium, the number of coconuts that will now be produced is

Daily demand for gasoline at Billy-Bob's Mobile Station is described by Q = 776 - 200p, where Q are gallons of gasoline sold and p is the price in dollars.Billy-Bob's supply is Q = 2890 + 1,500p.Suppose the state government places a tax of 20 cents on every gallon of gasoline sold.What is the deadweight loss resulting from this tax?

Long ago, a kindly prince noticed the misery of his subjects.His subjects all had the same preferences and the same low incomes.The demand function of each subject for bread was q = 26 - p, where p is the price of bread and q is the number of loaves per week.The supply of bread per capita per week was given by the function q = .3p.The king declared since his subjects did not even get a loaf of bread per day, he would help them by making it illegal to sell bread for more than 10 groschens per loaf.Unhappily, a bread shortage arose and people waited in long lines to get bread. a.Draw a graph to show why.Put numerical labels on the important points on your graph. b.If the citizens could earn 4 groschens per hour at work that was exactly as unpleasant as waiting in line, what would be the equilibrium waiting time for a loaf of bread?

Use supply and demand analysis to examine the following statement: "The practice of giving food stamps is self-defeating.Food stamps effectively lower the price of food.When food becomes available at lower prices, demand will increase thereby forcing the price up to its initial level." Is this reasoning correct? Draw supply and demand curves to illustrate your answer.

Suppose that King Kanuta, whom you met in your workbook, demands that each of his subjects give him 1 coconut for every coconut that they consume.The king puts all of the coconuts that he collects in a large pile and burns them.The supply of coconuts is given by S(p_s)= 100p_s, where p_s is the price received by suppliers.The demand for coconuts by the king's subjects is given by D(p_d)= 1,500 - 100p_d, where p_d is the price paid by consumers.In equilibrium, the price received by suppliers will be

The demand for pickles is given by p = 131 - 2q and the supply is given by p = 5 + 7q.What is the equilibrium quantity?

The quantity q of grapefruits demanded at price p is given by q = 30 - 3p and the supply schedule by q = 6p.The government imposes a quantity tax at some rate t, which it collects from buyers.What is the smallest tax rate that will result in no grapefruits being bought or sold?

Xaquane and Yullare are obscure but talented eighteenth-century painters.The world's stock of Xaquanes is 100 and the world's stock of Yullares is 70.The demand for each painter's work depends on its own price and the price of the other painter's work.If P_x is the price of Xaquanes and P_y is the price of Yullares, the demand function for Xaquanes is 101 - 3P_x + 2P_y and the demand function for Yullares is 72 + P_x - P_y.What is the equilibrium price for Yullare's paintings?