Problem Set

ECO 301Problem set 1Fall, 2009 Solutions 1. Show diagrammatically and pardon how increasing the b indian lodgeline wage affects the market for fast food. An amplification in moil costs leads to a decrease in the sound’s supply. As supply falls the equipment casualty of the good rises jumper cable to a decrease in total packed. It is feasible that racy 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 feature fast food. [pic] 2. Earlier this calendar month British oil corporation announced the discovery of a major rude(a) oil field (estimated reserves among 3 to 15 one 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 dis covery of a new oil field that forget not have for 2-4 years leave behind have no effect on current demand. Granted, expected legal injurys will be displace, but consumers argon not going to fall apart up driving for 2 years to take improvement of the price decrease. The effect of lower prices is more likely to be seen on the supply side.

oil colour companies that have expressage reserves might choose to step-up supply in the current time period if they expect future prices to fall. The add in current supply causes price to fall, leading to an increase in quantity demanded of oil. [pic] 3. Demand shot is defined as the responsivene! ss of consumers’ quantity demanded of a good to changes in that goods price. If demand is inelastic consumers are relatively in raw 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 political sympathies’s motives when it...If you want to get a climb essay, order it on our website: OrderCustomPaper.com

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