Economics 1201
Fall 2024
Homework #2
Due October 3, 2024, by 2:00 p.m.
NO LATE ASSIGNMENTS WILL BE ACCEPTED!
Complete the following five questions.
1. The following table summarizes the market for new textbooks at the UConn Bookstore.
Price Quantity Supplied Quantity Demanded
$175 40000 220000
$200 80000 200000
$225 120000 180000
$250 160000 160000
$275 200000 140000
a. Graph the above supply and demand schedules on the same graph.
b. What are the equilibrium price and quantity? Show the point of equilibrium on your graph.
c. At each price other than the equilibrium price, state whether there is a shortage or
surplus of textbooks and state how large this shortage or surplus is.
d. If the government intervened and stated that the price for the textbooks was to be set at
$175, would they be setting a price ceiling OR a price floor, so as to impact the market as
per the definition of what a price control is intended to do? Explain.
e. At the price of $175, how many new textbooks will be sold?
f. Suppose there is a technological advancement in the production of economics textbooks. Show how this would impact your graph for the economics textbooks at the UConn Bookstore. In other words, show if the supply curve or demand curve shifts and show the direction in which the curve will shift. Label what you did as T and explain what has occurred on the graph to the equilibrium price and quantity and also explain why you chose to shift this curve.
g. Suppose the bookstore has an increase in the number of used economics textbooks to sell. As you know the used textbooks (a substitute good) are less expensive than the new textbooks. Show how this increase in the number of used economics textbooks would impact your graph for the new economics textbooks at the UConn Bookstore. In other words, show if the supply curve or demand curve shifts and show the direction in which the curve will shift. Label what you did as U and explain what has occurred on the graph to the equilibrium price and quantity and also explain why you chose to shift this curve.
2. Supply and Demand Curve Shifts (this question is not related to question 1 above)
Drawing graphs to see the shifts in supply and demand will be beneficial, but to receive credit,
you must indicate in words what has happened to the equilibrium price (increase, decrease, or
indeterminate) and quantity (increase, decrease or indeterminate) as a result of these two
curves shifting simultaneously in the direction stated in each part below.
a. Suppose that both the supply and demand curve for a given product decrease
simultaneously. As a result of both changes occurring at the same time, explain in words
what impact these two changes together will have on the equilibrium price and the
equilibrium quantity for the given product.
a. This part is independent from part a.
Suppose that the supply curve for a given product decreases while at the same time the
demand curve for that same product increases. As a result of both changes occurring at
the same time, explain in words what impact these two changes together will have on the
equilibrium price and the equilibrium quantity for the given product.
3. Given the demand schedule from question 1, answer the parts below.
Price Quantity Demanded
$175 220000
$200 200000
$225 180000
$250 160000
$275 140000
a. Solve for the price elasticity of demand as the price changes from $175 to $200.
Round your response to four decimal places.
b. State whether the elasticity value you obtained signifies the product in this range
to be elastic, inelastic, or unit elastic.
c. Solve for the price elasticity of demand as the price changes from $250 to $275.
Round your response to four decimal places.
d. State whether the elasticity value you obtained signifies the product in this range
to be elastic, inelastic, or unit elastic.
e. Solve for total revenue at the price of $175.
f. Solve for total revenue at the price of $275.
4. Cross Price Elasticity of Demand
a. If the cross price elasticity between products A and B is equal to -1.1, would the two
products be classified as complement, substitute, or unrelated goods?
b. If the cross price elasticity between products A and B is equal to +2.6, would the two
products be classified as complement, substitute, or unrelated goods?
5. Income Elasticity of Demand
a. If the income elasticity of demand for a product is equal to 0.7, would this product be classified as a normal or inferior good? If it is a normal good, would it be considered a luxury or necessity?
b. If the income elasticity of demand for a product is equal to 2.4, would this product be classified as a normal or inferior good? If it is a normal good, would it be considered a luxury or necessity?
c. If the income elasticity of demand for a product is equal to -0.2, would this product be classified as a normal or inferior good? If it is a normal good, would it be considered a luxury or necessity?