Description
Market Part 1 – Application
1. Given Ted can wax 4 cars per day or wash 2 cars per day and Tom can wax 3 cars per day or wash 1 car per day.
What is each man’s opportunity cost of waxing ONE car?
Who has an absolute advantage of waxing cars?
Who has a comparative advantage of waxing cars?
2. Explain – using the key concepts discussed in the lectures – why it costs $1,500 and 6 months to make a sandwich from scratch (article).
Why is this approach to production not a good use of resources?
Market Part 2 – Application
4.4 Why does the demand curve slope downward? Why does the supply curve slope upward? Given the demand and supply schedules below:
|
Price (dollars per CD) |
Quantity Demanded (per day) |
Quantity Supplied (per day) |
|
5.00 |
300 |
100 |
|
6.00 |
250 |
150 |
|
7.00 |
200 |
200 |
|
8.00 |
150 |
250 |
|
9.00 |
100 |
300 |
What is the market equilibrium?
If the price of a CD is $6.00, describe the situation in the CD market. Explain how market equilibrium is restored.
A rise in incomes increases the quantity of CDs demanded by 100 a day at each price. What is the new equilibrium and how does the market adjust?
A rise in the number of recording studios increases the quantity of CDs supplied by 75 a day at each price. People download more music from the Internet and the quantity demanded of CDs decreases by 25 a day at each price. With no change in incomes, what is the new equilibrium and how does the market adjust?
