1. Classify the effects of the following as:

(a) a decrease/increase in the demand for fish, (b) a decrease/increase in the quantity of fish demanded, or (c) others.

1.1 The price of chicken falls, and as a result consumers buy more chicken and less fish.

1.2 The government of Japan bars fishermen from other nations from its waters.

1.3 People buy less fish because fish prices have risen

1.4 It is claimed that eat more fish and less red meat will lead to better health.

2. The demand and supply schedules for toys are as follows:

Price         Quantity demanded     Quantity supplied

($ per unit) (thousand per year) (thousand per year)

10                 500                             0        

20                 450                             50

30                 400                             100

40                 350                             180

50                 300                             300

60                 250                             350

70                 200                             400

80                 150                             450

90                 100                             500

 2.1 What is the equilibrium price of toys?

2.2 What is the equilibrium quantity of toys?

2.3 Suppose a rise in children population increases the demand for toys by 100 thousand per

year, what are the new equilibrium price and quantity of toys? Show the effects of the changes in a diagram.

2.4 Suppose the demand for toys returns to the original levels after a year, but a fire destroys some of the toy factories and the quantity supplied is reduced by a half, what are the new equilibrium price and quantity of toys? Show the effects of the fire in a diagram.

3. The following table gives the demand and supply for mobile phone calls:

Price               Quantity demanded      Quantity supplied

($ per minute)(million minutes/day)(million minutes/day)

            Short-run    Long-run       Short-run     Long-run

1.00        60               80                 20                 80

1.50        40               40                 40                 200

2.00        20                 0                 60                 320

 3.1 Calculate the mid-point elasticity of short-run demand and supply between $1 and $2.

3.2 Calculate the mid-point elasticity of long-run demand and supply between $1 and $2.

3.3 If the price of a call decreases from $1.50 per minute in the short-run to $1.00 per minute in the long-run, does the total expenditure on calls increase or decrease ?

Demand & Supply - Discussion Topic Questions:

(I) Discuss whether the following statements are inconsistent :

(a) Rising demand for housing causes prices of new homes to soar.

(b) Many families refuse to buy homes as prices become prohibitive for them.

(II) Which of the following approaches to reduce a deficit is better and why:

(a) Local cinemas cut the ticket prices to attract more customers.