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Consider the following demand schedule for umbrellas at a local store:

Consider the following demand schedule for umbrellas at a local store: a. Draw the demand curve for...

a. Draw the demand curve for umbrellas. Be sure to label the axes.

b. Suppose the price of umbrellas is $14. Indicate the area of market consumer surplus in your graph. Also indicate the area that represents the total amount that consumers spend on umbrellas.

c. Next, assume that Rebecca is willing to pay a maximum of $18 for an umbrella. What is Rebecca’s consumer surplus if she purchases an umbrella? Show her consumer surplus on your graph.

d. Another consumer, Andy, is willing to pay a maximum for $10 for an umbrella. What is his consumer surplus in this market?

e. If the demand schedule above represents demand on a normal summer day, what would you expect to happen to market consumer surplus if the forecast is for a heavy rainfall? Assume that the store does not raise its price. Draw a graph to support your answer.

 
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Suppose that the market equilibrium price for a basic medical check-up is $50, in a market in which there is no health insurance. To encourage more people to get a check-up, the local government mandates that the price of a check-up cannot be more than $40.

a. Is this a price floor or a price ceiling?

b. Draw a graph to illustrate the implementation of this government policy.

c. What happens to the number of check-ups in this market? Show this in your graph.

d. What happens to consumer surplus in this market? What happens to producer surplus? Show these changes on your graph.

e. Was the government’s policy successful? What has happened to social welfare? Show this in your graph.

f. Can you think of a different policy that would likely be more successful at encouraging more people to obtain check-ups?

g. Is this a typical market? Is there any reason to suppose that producers of health care would respond differently to price regulation than, say, producers of umbrellas? What does the producer’s responsiveness have to do with the cost of providing health care? What other factors might be involved?

 
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Consider the following supply schedule for apartments in a local market.

Consider the following supply schedule for apartments in a local market. a. Draw the supply curve...

a. Draw the supply curve for apartments. Be sure to label the axes.

b. Suppose the going rental price for apartments is $550 per month. How many apartments will be supplied? (Assume the supply curve is a straight line between the points in the table above.)

c. Indicate the area of market producer surplus in your graph. Also indicate the area that represents the total cost of supplying apartments.

d. Next, assume that a particular landlord is willing to supply an apartment only if the rental price is at least $450 per month. What is her producer surplus in this market?

e. Use graph to support your answer. f. Suppose that the price for condominiums in the area increases. This creates an incentive for apartment owners to convert their rented apartments to condominiums (which are sold to buyers, rather than rented), thus removing them from the rental market. What would you expect to happen to producer surplus in the apartment market as a result of this change? Draw a graph to support your answer

 
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Monifa plans to spend her income on concert tickets and movie tickets. Suppose that she has an income of $100. The price of a concert ticket is $20, and the price of a movie ticket is $10.

a. Draw, and carefully label, a budget line diagram illustrating the consumption combinations that she can afford.

b. Can she afford 6 movie tickets and 1 concert ticket? Label this point on your graph.

c. Can she afford 2 movie tickets and 6 concert tickets? Label this point on your graph.

d. Can she afford 4 movie tickets and 3 concert tickets? Label this point on your graph.

e. Which of the combinations mentioned just uses up all her income?

 
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