#1) Finding Market Equilibrium mathematically. Suppose that daily demand for
donuts is given by the equation ? = 10 − 0.25?? while the supply curve is given by
? = 0.5?? + 1
a) Calculate the equilibrium price and quantity algebraically. (ie: solve the
equations)
b) Draw the supply and demand curves and label the equilibrium price and
quantity
#2) Changes in Equilibrium due to Shifts in Supply and Demand. To examine the
market for Windows-based HP laptop computers, draw a downward sloping demand curve
and an upward sloping supply curve (don’t worry about actual numbers, just draw a
demand and supply curve). Show the equilibrium price and quantity as P* and Q* in a
clearly labeled diagram.
For each part below, draw a new supply and demand diagram showing the original
equilibrium and the new equilibrium following the described event. In each case, make
sure your diagram shows the changes, if any, in (1) the supply curve, (2) the demand curve,
and (3) the equilibrium price and quantity. Also explain in words what shifted, and why
you shifted it the way you did.
a) Windows 10 software prices drop
b) Microchip prices rise (microchips are an input in computer manufacturing)
c) A major bug is found in the Intel Core processor chip used in the HP laptops
d) Apple cuts prices for Mac computers
e) A new law requires all computers to be equipped with ergonomic keyboards,
which are more expensive to produce than standard keyboards. Assume that
consumers like ergonomic keyboards.
**note, there is not necessarily one “right” answer to these…your answer may depend
on your interpretation of the events, therefore make sure to explain your reasoning.
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#3) How might the following shift the demand curve for flowers? For those things that
WOULD shift the demand curve, in which direction would it shift? Explain.
a) an increase in income
b) A decrease in the price of chocolates (a substitute good)
c) The approach of Valentine’s Day (when lots of flowers are given)
d) A change in the price of flowers
e) A popular celebrity campaigns for “plant’s rights” and argues that cutting down
flowers is murder to the plant