1. a. When the price of olive oil goes up, what probably happens to the demand for corn oil?
b. If consumers thinks that the price of tomatoes will go up next week, what is likely to happen to demand for tomatoes today?
Required: Graph the markets for corn oil; tomatoes
2. Redraw and shade producer surplus area assuming the following: the market price is $50 per barrel; the market quantity sold at that price is 40 units. Further, assume the supply curve starts at a value of 5$ and follows the normal shape of a supply curve. Recall that, for a triangle, area = (1/2) 3 Base x Height. Solve (compute) dollar value for the producer surplus area. (You never thought you’d use that equation unless you became an engineer, did you?)
3.Graph each separately:
a. When demand increases, graph what happens to price and quantity in equilibrium?
b. When supply increases, graph what happens to price and quantity in equilibrium?
c. When supply decreases, graph what happens to price and quantity in equilibrium?
d. When demand decreases, graph what happens to price and quantity in equilibrium?
4. Graph each separately:
a. If the price of margarine decreases, graph what happens to the demand for butter? Show what happens, graphically, to the equilibrium quantity and price for butter.
b. If the wage of sugar cane harvesters increased what does the graphical effect look like the market for sugar cane?
c. If a new study emphasized the negative consumer health effects of sugar, then how would that effect the equilibrium quantity for sugar?
d. If Redwood City decides to impose rent control on apartments, graph the effect on the rental apartment market.
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