Palm Beach State College
ECO MICROECONO
Exam: 02.11 Supply and Demand Module Exam Part B 1. Graph the market for scones, assuming unit-elastic supply and demand. Label the equilibrium price Pe and the equilibrium quantity Qe. Graph is shown on the second page. 1. Average consumer income goes from $25,000 to $30,000 as the quantity demanded increases from 50,000 units to 60,00
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Exam: 02.11 Supply and Demand Module Exam Part B 1. Graph the market for scones, assuming unit-elastic supply and demand. Label the equilibrium price Pe and the equilibrium quantity Qe. Graph is shown on the second page. 1. Average consumer income goes from $25,000 to $30,000 as the quantity demanded increases from 50,000 units to 60,000 units. What is the income elasticity for scones across this range? The income elasticity for scones is 1. Work is shown on second page. 2. Are scones a normal or inferior good? Explain using the income elasticity coefficient. Scones are a normal good. This is because the income elasticity coefficient is positive. 3. Illustrate the effect of part (b) on your graph from part (a), labeling the new equilibrium price and quantity Pe2 and Qe2, respectively. The graph illustrated on the second page shows the new Pe2 and Qe2 and the D2 line. 4. What happened to the producer surplus as a result of part (d)? The producer surplus increases as the price and quantity also increase. The area below the equilibrium line increases, so the surplus increases as well. 5. On a new graph, illustrate the effect of an effective price floor on the market for coffee cakes. Label the price floor Pf and the quantity exchanged Qf. New graph is illustrated
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