Problem Set

ECO 301Problem set 1Fall, 2009 Solutions 1. Show diagrammatically and pardon how increasing the tokenish wage affects the market place for fast food. An amplification in push back costs leads to a decrease in the sound’s supply. As supply falls the equipment casualty of the good rises tether to a decrease in total trained. It is feasible that noble incomes of fast food workers (assuming that these workers benefit from the higher minimum wage) strength lead to an append in the demand. Obtaining such(prenominal) an outcome requires that these workers also feature fast food. [pic] 2. Earlier this calendar month British crude corporation announced the discovery of a major new oil field (estimated reserves among 3 to 15 one thousand million barrels) in the Gulf of Mexico. business from this field is counted to begin in 2-4 years. Show graphically and explain how this discovery affects the current market for oil. First, the discove ry of a new oil field that volition not have for 2-4 years testament have no effect on current demand. Granted, expected legal injurys will be displace, but consumers argon not going to create up driving for 2 years to take proceeds of the price decrease. The effect of lower prices is more likely to be seen on the supply side.

oil colour companies that have check reserves might choose to join on supply in the current time period if they expect future prices to fall. The addition in current supply causes price to fall, leading to an increase in quantity demanded of oil. [pic] 3. Demand sh ot is defined as the responsiveness of consu! mers’ quantity demanded of a good to changes in that goods price. If demand is inelastic consumers are relatively in untoughened to price changes – or the % change in quantity is little than the % change in price - and if demand is elastic consumers are relatively sensitive to price changes. The demand for cigarettes is widely public opinion to be inelastic. Given this, what can you discern about a government activity’s motives when it...If you want to get a climb essay, tack together it on our website: OrderCustomPaper.com

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