Reference no: EM1312223
1. List and describe the sources of expenditures in the economy by focusing on the four major sectors of the economy.
2. The demand and supply functions for sweatshirts (the basic grey kind) are as follows:
|
Quantity Demanded
|
Quantity Supplied
|
|
Price (per period)
|
Price (per period)
|
|
$10
|
15,000
|
$10
|
22,000
|
|
9
|
15,500
|
9
|
19,000
|
|
8
|
16,000
|
8
|
16,000
|
|
7
|
16,500
|
7
|
13,000
|
|
6
|
17,000
|
6
|
10,000
|
|
5
|
17,500
|
5
|
7,000
|
|
4
|
18,000
|
4
|
4,000
|
|
3
|
18,500
|
3
|
1,000
|
|
2
|
19,000
|
2
|
0
|
The equations for the demand and supply functions above are as follows:
Qd = 20,000 - 500P Qs = -8,000 + 3000P
- Solve for the equilibrium price and quantity. (Hint: at equilibrium, quantity supplied equals quantity demanded.)
- Assume the supply function changes to:
Qs = -5,000 + 3000P
Does supply increase or decrease? What is the new equilibrium price and quantity?
3. Assume that, over time, engineers develop new residential furnaces that can run on different types of fuels, e.g., natural gas, electricity, propane, and fuel oil, simply by flipping a switch on the furnace. How would this technological change affect the price elasticity of demand for natural gas? Why?