Homework
#2, Econ 306, Prof. Hanson.
The demand for donuts in the Johnsen Center on any given morning is given by Q = 20 –10 P, while the supply is given by Q = 30P. P is the price in dollars and Q is the number of donuts.
1. What if a tax of $0.50 per donut were imposed?
a. If the tax were paid by donut sellers, what would be the new demand curve? By how much would the quantity and price change?
b. If the tax were paid by donut buyers, what would be the new demand curve? By how much would the quantity and price change?
2. What if a law were passed requiring donuts be sold for no less than some minimum price?
a. What is the price and quantity if the minimum price is $0.25?
b. What is the price and quantity if the minimum price is $1.00?
3. The following table describes the supply and demand for movies in Fairfax and Arlington.
|
|
Fairfax |
|
Arlington |
|
|
Price |
Q Demand |
Q Supply |
Q Demand |
Q Supply |
|
1 |
9 |
1 |
14 |
10 |
|
2 |
8 |
2 |
12 |
12 |
|
3 |
7 |
3 |
10 |
14 |
|
4 |
6 |
4 |
8 |
16 |
|
5 |
5 |
5 |
6 |
18 |
|
6 |
4 |
6 |
4 |
20 |
|
7 |
3 |
7 |
2 |
22 |
a. Find the price and quantity of movies in each city, assuming people in each city are only allowed to watch movies in their city.
b. Find the price and quantity of movies in each city, assuming people in each city are allowed to watch movies in whatever city they choose.
c. In this second case, what quantity of people travel from one city to the other to watch movies? Which city do they travel to?