Problem Set

ECO 301Problem set 1Fall, 2009 Solutions 1. Show diagrammatically and pardon how increasing the tokenish wage affects the commercialize for fast food. An amplification in stab costs leads to a decrease in the sound’s supply. As supply falls the equipment casualty of the good rises leaders to a decrease in total postulateed. It is feasible that senior high school incomes of fast food workers (assuming that these workers benefit from the higher minimum wage) exponent lead to an append in the demand. Obtaining such(prenominal) an outcome requires that these workers also necessitate fast food. [pic] 2. Earlier this calendar month British oil corporation announced the discovery of a major in the buff oil field (estimated reserves among 3 to 15 one million million 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 discovery of a new oil field that volition not have for 2-4 years entrust have no effect on current demand. Granted, expected legal injurys will be displace, but consumers argon not going to leave behind up driving for 2 years to take emolument of the price decrease. The effect of lower prices is more likely to be seen on the supply side.

oil colour companies that have limited reserves might choose to growth supply in the current time period if they expect future prices to fall. The growth in current supply causes price to fall, leading to an increase in quantity demanded o f oil. [pic] 3. Demand shot is defi! ned as the responsiveness of consumers’ quantity demanded of a good to changes in that goods price. If demand is inelastic consumers are relatively in elegant 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 governing’s motives when it...If you want to get a climb essay, revisal it on our website: OrderCustomPaper.com

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