1.  The demand curve for thingamajigs is Q = 500 – 10P, and the supply curve is Q = 5P -100.
a. Calculate the equilibrium price and quantity of thingamajigs.
b. Find the consumer surplus and producer surplus in equilibrium.
c. Suppose that market demand for thingamajigs changes to Q = 500 – 5P. Is this an increase or decrease in demand? Find the new equilibrium price and quantity in this case.
2.  The demand curve for widgets in a market is Q = 100 – 4P, and the supply curve is Q = 4P - 20.
a. Calculate the equilibrium price and quantity of widgets.
b. A $2/unit commodity tax is now imposed on widgets. Calculate the equilibrium quantity with the tax, the price paid by consumers, the price received by suppliers, the proportion of the tax paid by consumers and suppliers respectively, and the amount of revenue raised by the tax.
3.  Let the market demand for avocadoes be Q = 60 – 2P and the market supply by Q = 5P – 10.
a. Calculate the equilibrium price and quantity of avocadoes.
b. Suppose that the government imposes a price ceiling on avocadoes of $5. Find the
quantity demanded, quantity supplied, and amount of the surplus or shortage in the
market at the price ceiling of $5.
c.Find the height of the demand curve for the quantity supplied at the $5 price ceiling price.
Explain how this dollar value might represent a black market price for avocadoes given
the price ceiling.
4.  Angelina consumes two goods, pears and tofu. Draw her budget line for each of the following cases:
a. Price of pears = $1, price of tofu = $2, income = $20.
b. Price of pears = $2, price of tofu = $2, income = $20.
c. Price of pears = $1, price of tofu = $1, income = $20.
d. Price of pears = $1, price of tofu = $2, income = $30.
e. Price of pears = $2, price of tofu = $4, income = $40.
5.  Graph the budget line for each of the following circumstances.
a.Consider a budget line for Bill for his choice between spending on movies to watch on Netflix and all other goods. Movies cost $5 to watch on Netflix. Bill has cash income of $100 and a $50 Netflix gift card, which cannot be resold and must be used entirely during the current period.
b.Serena purchases food and clothes and works at a clothing store. Her income is $200, the price of food is $5, and the price of clothes is $20. However, Serena receives an employee discount of the following form: She gets 50% off the price of all clothes items after she has purchased 3 at the regular price.
6.  Sketch out utility = 50 and utility = 100 indifference curves for each of the following utility functions. In each case describe the type of preferences that appear to be represented by each utility function:
a. U(x,y) = 4x + 2y
b. U(x,y) = 30 + x + y
c. U(x,y) = x*y
d. U(x,y) = Minimum(6x, 3y)
7.  Fran purchases 8 pizzas per month when the price is $12 and 6 per month when the price is $15. Calculate Fran’s price elasticity using the midpoint formula. Is her demand for pizza elastic or inelastic?
8.  The Last Chance Deli sells 100 roast beef sandwiches a day when the price of meatball subs is $5 and 120 roast beef sandwiches when they raise the price of meatball subs to $7. Calculate the cross price elasticity, and based on your answer, are these two sandwiches substitutes or complements?
9.  Julio buys 12 boxes of Ramen noodles per month when his income is $500 per month and 2 boxes per month when his income is $1,000 per month. Calculate Julio’s income elasticity for Ramen, and based on your answer, is Ramen a normal or inferior good for him?
10.  Suppose that we observe a pet store offering a promotion to give away goldfish, which they normally sell for $7 each. Could such a promotion possibly increase the store’s revenue? Explain.
11.  Suppose that market demand for beach towels in Destin is Q = 1000 – 100P per week. At what price and quantity will consumer spending on towels be maximized, and what is this maximized expenditure per week?