Question

Questions 1 and 2 do not need to be answered, they are just there for questions 3 and 4. Only bolded need answered.

1.Graph the following market demand function Q = 300-25P, plotting P (prices) on the vertical axis, and Q (quantity), on the horizontal axis. Next, show how much quantity demanded changes when the price of the good given by this demand function increases from $5 to $7?

2.Consider that the demand curve in part (a) above represents the market demand for a steak burger meal in a local area. This local area has three fast-food restaurants that exclusively produce these meals, and they are owned by Sam, Sony, and Sheila. Their supply curves for a steak burger meal are given as follows:

Sam's Eatery		Sony's Hot Meals		Sheila's "To Go"
Price ($)	Quantity	Price ($)	Quantity	Price ($)	Quantity
2.50	0	2.50	5	2.50	5
5.00	15	5.00	20	5	15
8.00	28	8.00	42	8.00	30
10.00	35	10.00	50	10.00	40
12.50	55	12.50	75	12.50	60
15.00	80	15.00	100	15.00	80

 

 

 

 

 

 

 

 

 

 

 

 

 

3.Consider the exercise in Question 2. The government now declares that steak burger meals in that locality should sell for $5.00. Given the correct answers in Question 1(b), would this represent a price ceiling or a price floor? Explain. Further, determine what would be the quantity of shortage or surplus that would exist in this market, and be explicit whether it is a surplus or a shortage and explain why.

4.Given the readings you looked at on price controls, what other problems typically arise, besides shortages or surpluses, when price controls are put in place within well-functioning markets?