EC208 - Intro to MicroEconomics Quiz 4 (Review for Test 1).
Professor Matthew Festa
Due in Class Thursday Oct 12th
1) Draw the supply and demand curve for orange sweatshirts. Paris Hilton and Nick Lachey begin wearing the orange color sweatshirts and Vogue magazine begins calling "orange the new green." (note that green was the previous in color, which was preceded by lavender). Show any shifts in the supply/demand curves and any change in price or output (2 points).
2) Draw the supply and demand curve for the Auto industry. The US and Japan (a big producer of steal) get into a huge fight and Japan cuts off trade (and thus steal supplies). Steal is needed to build cars. Show any shifts in the supply/demand curves and any change in price or output. (2 points).
3) Explain in words what the price elasticity of demand is. If the price of coffee rises 2% and the quantity demanded falls 0.5% is this in elastic or inelastic good. Show the calculation. (2 points).
4) Explain in words what the cross price elasticity of demand is. What three types of goods are there? If the price of tea falls 3% and the quantity demanded of coffee increases 6%, what type of good is this (2 points).
5) Draw the supply and demand for the shrimp fishing industry. A government study shows that the shrimp boats pollute the water which damages the water supplies for a neighboring village. What type of externality is this? Show what shift is needed to bring about the optimal output and price of Shrimp (2 points).