Demand

Chapter 4. Exercices 7-12. The market forces supply and demand.

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7. Ketchup is a complement (as well as condiment)for hotdogs. If the price of hot dogs rises, what happens to the market for ketchup? For Tomatoes? For tomato juice? For orange juice? 8. The case study presented in the chapter discussed cigarette taxes as a way to reduce smoking. Now think about the markets for other tobacco products such as cigars and chewing tobacco.A. Are these goods substitutes or complements for cigarettes. B. Using a supply-and-demand diagram, show what happens in the markets for cigars and chewing tobacco if the tax on cigarettes is increased c. If policymakers wanted to reduce total tobacco consumption, what policies could they combine with the cigarette tax 9. The market for pizza has the following demand and supply schedules: Graph the demand and supply curves. What is the equilibrium price and quantity in this market? If the actual price in this market were above the equilibrium price, what would drive the market toward the equilibrium? If the actual price in this market were below the equilibrium price, what would drive the market toward the equilibrium. 10. Because bagels and cream cheese are often eaten together they are complements.A. We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be responsible for this pattern-a fall in the price of flour or a fall in the price of milk? Illustrate and explain your answer. b. Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What could be responsible for this pattern-a rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer. 11. Suppose that the price of basketball tickets at your college is determined by market forces. Currently, the demand and supply schedules are as follows. A. Draw the demand and supply curves. What is unusual about this supply curve? Why might this be true. B. What are the equilibrium price and quantity of tickets? c. Your college plans to increase total enrollment next year by 5,000 students. The additional students will have the following demand schedule: Now add the old demand schedule and the demand schedule for the new students to calculate the new demand schedule for the entire college. What will be the new equilibrium price and quantity? 12. An article in The New York Times described a successful marketing campaign by the French champagne industry. The article noted that “many executives felt giddy about the stratospheric champagne prices. But they also feared that such sharp price increases would cause demand to decline, which mistake are the executives making in their analysis of the situation? Illustrate your answer with a graph.