a. Draw Supply and Demand Curves.
b. What are the equilibrium price and the equilibrium quantity?
c. Suppose the market price is $5. What problem would exist in the market? Does it lead to surplus or shortage? How do you expect this problem will affect the price? Indicate this on the supply and demand graphs.
d. Assume the market price is currently $2. What problem would occur in the market due to this price? Will it be shortage or surplus? What will its effect on the price? Indicate this on the supply and demand graph.
2) Consider supply and demand schedules for Alaska Salmon indicated in the following tables to answers questions from a –d below.
|Price of Salmon per Pound||Quantity of Salmon Supplied (pounds)|
First, assume that Alaskan Salmon can be sold only in the United States. The U.S. demand schedule is as follows:
|Price of Salmon per Pound||USA Quantity of Salmon Demanded (pounds)|
a. Referring to the schedules of supply and demand, what is the equilibrium price of Salmon? What is the equilibrium quantity of salmon demanded and supplied at the equilibrium price?
b. Second, assume that Alaskan Salmon can also be sold in UK. The UK demand schedule for salmon is as follows:
|Price of Salmon per Pound||Quantity of Salmon Demanded (pounds)|
What is the combined demand schedule for Alaskan salmon after the UK consumers join the market for Alaskan salmon?
c. Refer to the combined U.S. and UK demand schedule, the U.S. demand schedule and the supply schedule, and analyze the change in the market for salmon .What will happen to the price at which fishermen can sell salmon? What will be the final output of salmon?
d. After UK joins the market demand for salmon, what will happen to the price U.S. consumers pay for salmon? What will happen to the quantity of salmon consumed by U.S. consumers?
3) Assume Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fresh fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish.
|Quantity of Potatoes (Pounds)||Quantity of Fish (Pounds)|
Consider the maximum annual output of potatoes and fish indicated in the table above. The maximum output of the two products is also indicated on the Production Possibility Frontier graphs below. Answer the following questions from a – e using the information in the table and PPF graphs.
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