Economics Homework Two Answers - Student Twenty-Two
1. The supply of a good, and the demand for that good, determine both the ______ and ______ at which the good is sold (assuming it is a free market).:
The supply of a good, and the demand for that good, determine both the quantity and price at which the good is sold.
2. Suppose the price demand curve for a particular good is P = $30 - Q, where P is the price and Q is the quantity. Also suppose the price supply curve is P = $6 + Q. At which price and quantity will the good be sold (assuming a free market)?: P=$18, Q=$12
- Correct again, except quantity does not have the units of "$" Minus 1. :-(.
3. When the supply of a good or service increases, such as increasing the number of oil wells, what happens to the market price of oil? Explain. When the demand for a good a good or service increases, such more people driving cars that need gasoline (refined oil), what happens to the market price of oil? Explain.
When the supply of a good or service increases, the price will decrease. If there was plenty of oil, it would not be considered scarce and the value of it would go down. When the demand for a good increases, such as more people driving cars that need gasoline, the price increases because of the quantity needed. When the world is in need of something the price goes up, especially if the item is considered to be scarcer then others.
- Superb answer, could use as a model. Note, however, that better grammar is to say, "if there were plenty of oil," not "if there was plenty of oil."
4. Why do grocery stores lower the price of their fruit (such as grapes) when they have an oversupply of ripened fruit? Explain by citing the downward slope of a demand curve, and describe what happens to this fruit after the grocery store lowers its price.
If the price is too high for a certain item, the public will not buy as much, which means the grocery store will end up coming out with an oversupply of the product. If the store lowers the price of the item, the chances of more people buying it increases by a great amount and the store will sell a lot more. However, if the price is too low, that can hurt the store as well. The store might have sold all the fruit but made less money then needed since the price was below what the item is actually worth.
- Terrific answer.
5. When the New York Yankees built their new $1.5 billion ballpark, they made a decision about how many "obstructed view" bleacher seats to include. Due to the design of this new stadium, people sitting in these bleacher seats could not see all of the field because part of the stadium structure blocks part of their view. Here is what the supply and demand are for those obstructed-view seats: Quantity of "Obstructed-View" Tickets Demand Price/Ticket Supply Price/Ticket 300 $10 $3 600 $5 $5 900 $3 $7 1000 $2 $9:
A) How many "obstructed view" bleacher seats did the New York Yankees build, based on the above data, and how much does the team make from sales of these tickets at each game?: The stadium built 600 obstructed-view seats, and make approximately $3,000 per game.
B) Suppose the City of New York passed a law for a maximum price (a "price control") of $2 per "obstructed view" bleacher ticket. Will the obstructed-view seats sell out under this law, and will people have to wait in line in order to buy them? Would you oppose or support such a law, and why?: I would oppose this law. The tickets would sell out immediately and the lines would be ridiculously long in order to see a baseball game. This law would interfere with the free market, and supply would no longer meet demand.
- Correct on both answers. You explain your position on Part (B) very well.
6. "Time is money." Explain. Or, as an alternative, improve on our definition of a "free market." Or, as a third alternative, explain how the free market is so much powerful than even the wealthiest people in the world. The phrase “Time Is Money” was recited by Benjamin Franklin in 1748. Ever since it has been a popular concept that Americans use and hear daily. This statement refers to wasted time as wasted money. If one sits around doing nothing when he could be out in the world making money he is wasting his time which leads to a result of wasted money. As Benjamin Franklin says, “He that can earn ten shillings a day by his labor, and goes abroad, or sits idle, one half of that day, though he spends but sixpence during his diversion or idleness, ought not to reckon that the only expense; he has really spent, or rather thrown away, five shillings. Remember, Time Is Money”.
- Superb, will probably use as a model! Great info about Benjamin Franklin as the source of the term.
7. Explain why waiting lists develop in countries (like Canada and England) where the government prohibits anyone from charging more than fixed prices for medical services, assuming that these fixed prices are lower than what the prices would be under supply and demand in the free market. (Hint: the reason is related to the effect of price controls on the supply of a good or service.):
Waiting lists develop because there is a higher demand then supply. There are more people needing to be treated than doctors to treat them. The government pays for all health care, and bureaucrats put limits on spending in order to control costs. They determine how much doctors can be reimbursed and put caps on the amount of money that can be spent on treatments. Many people say “when the government takes over you may not get the care and breakthroughs you need to save your life.”
- Very nearly perfect work! Well done indeed. 69/70. Congratulations!--Andy Schlafly 13:58, 20 September 2009 (EDT)