What do you think happens to the demand for pizzas during the Super Bowl? Why?

1) What do you think happens to the demand for pizzas during the Super Bowl? Why?

2) For each of the following goods, do you think it’s a normal good or an inferior good?

 a. Beans

b. Tuxedos

c. Used clothing

d. Used Ferraris e. Computers

 f. Books reviewed in the New York Times

g. Macaroni and Cheese

h. Calculators

 i. Cigarettes j. Caviar

k. Legal Services

3) Which of the following pairs of goods are likely to be classified as substitutes? Complements?

a. Peanut Butter and Jelly

b. Eggs and Ham

c. Nike brand sneakers and Reebok brand sneakers

d. Apple iPhone and Samsung Galaxy

e. Dress shirts and ties

f. Airline tickets and hotels g. Gasoline and tires h. Beer and wine i. Faxes and first-class mail

j. Cereal and milk

k. Cereal and eggs

4) A study found that lower airfares led some people to substitute flying for driving to their vacation destinations. This reduced the demand for car travel and led to reduced traffic fatalities, since air travel is safer per passenger mile than car travel. Using the logic suggested by that study, suggest how each of the following events would affect the number of highway fatalities in any one year.

a. An increase in the price of gasoline

b. A large reduction in rental rates for passenger vans

c. An increase in airfares

5) Gasoline prices typically rise during the summer, a time of heavy tourist traffic. A “street talk” feature on a radio station sought tourist reaction to higher gasoline prices. Here was one response: “I don’t like ’em [the higher prices] much. I think the gas companies just use any excuse to jack up prices, and they’re doing it again now.” How does this tourist’s perspective differ from that of economists who use the model of demand and supply?

 6) The graphs below show four possible shifts in demand or in supply that could occur in particular markets. Relate each of the events described below to one of them. (AKA, match the situations below with the panels below)

a. How did the heavy rains in South America in 1997 affect the market for coffee?

b. The Surgeon General decides french fries are not bad for your health after all and issues a report endorsing their use. What happens to the market for french fries?

c. How do you think rising incomes affect the market for ski vacations?

d. A new technique is discovered for manufacturing computers that greatly lowers their production cost. What happens to the market for computers?

7) Use the graph below to answer the questions that follow.

a. At a price of $1.50 per dozen, how many bagels are demanded per month? b. At a price of $1.50 per dozen, how many bagels are supplied per month?

c. At a price of $3.00 per dozen, how many bagels are demanded per month?

d. At a price of $3.00 per dozen, how many bagels are supplied per month?

e. What is the equilibrium price of bagels? What is the equilibrium quantity per month?

8) Use the chart below to answer the questions that follow. Price $3 $4 $5 $6 $7 $8 $9 Quantity Demanded 40 35 30 25 20 15 10 QD2 Quantity Supplied 10 15 20 25 30 35 40

a. In the space below, graph the supply and demand schedule. After you have completed that, consider a shift where there is 20 million more pounds of coffee demanded at any given price. Show that shift on the supply and demand schedule by filling in the missing values in the column titled “QD2”.

b. What was the equilibrium price and quantity before the shift?

c. What was the equilibrium price and quantity after the shift?

d. Suppose the quantity supplied rises by 20 million pounds per month at each price, while the quantities demanded retain the values shown in the table above (aka, there was never a shift in the demand that we demonstrated in Part A). Draw the new supply curve and show the new equilibrium price and quantity.

9) Use the supply and demand schedule below to answer the questions that follow. Price $1 $2 $3 $4 $5 $6 $7 $8 Quantity Demanded 8 7 6 5 4 3 2 1 Quantity Supplied 0 1 2 3 4 5 6 7

a) Graph the demand and supply curves and show the equilibrium price and quantity.

 b) At a price of $3 per gallon, would there be a surplus or shortage of gasoline? How much would the surplus or shortage be? Indicate the surplus or shortage on the graph.

 c) At a price of $6 per gallon, would there be a surplus or shortage of gasoline? How much would the surplus or shortage be? Show the surplus or shortage on the graph.

d) Suppose the quantity demanded increased by 2,000 gallons per month at each price. At a price of $3 per gallon, how much would the surplus or shortage be? Graph the demand and supply curves and show the surplus or shortage.

e) Suppose the quantity supplied decreased by 2,000 gallons per month at each price for prices between $4 and $8 per gallon. At prices less than $4 per gallon the quantity supplied becomes zero, while the quantities demanded retain the values shown in the table. At a price of $4 per gallon, how much would the surplus or shortage be? Graph the demand and supply curves and show the surplus or shortage.

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