The diagram below shows a set of budget lines facing a household. Quantity of Housing per Month cf Quantity of Food per Month FIGURE 6-8 19) Refer to Figure 6-8. The movement of the budget line from ab to db could be caused by A) a decrease in money income. B) an increase in the price of housing. C) a decrease in the price of housing. D) an increase in the price of food. E) a decrease in the price of food.

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Collen VonLv2

24 Nov 2018

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Quantity of milk per week Quantity of milk per week B3 BBB Quantity of bread per week 1) Quantity of bread per week (in FIGURE 6-6 18) Refer to Figure 6-6. In part (ii), the consumer's move from point Z to point Y is caused by A) a change in the consumer's preferences towards milk. B) an increase in the price of milk. C) an increase in the price of bread. D) an decrease in the price of bread. E) a decrease in money income.

The shift of the budget line from AB to CD in the figure is consistent with:

A) decreases in the prices of both M and N.
B) an increase in the price of M and a decrease in the price of N.
C) a decrease in money income.
D) an increase in money income.

champagneant871

The general supply function for new housing in New Orleans is estimated to be

Qs = 96 + 2P - 10PL + 4PK

where P is the price per square foot of new housing in New Orleans, PL is the average hourly wage rate for construction workers, and PK is the price of capital (as measured by the average rate of interest paid on loans to home builders). Qs is measured in units of 1,000 square feet per month.

5. Does it make sense for PL and PK to have negative coefficients in the general supply function? Explain why or why not.

6. If the average hourly wage rate for construction workers is $10 per hour and the average rate of interest on loans to builders is 9 percent (i.e., PK = 9), then the supply function for new housing is

Qs = ______________________.

7. Graph the supply curve for new housing in the graph below. Label supply S0.

8. Solve mathematically for equilibrium price and quantity. Show your work:

PE = $__________ per square foot.

QE = __________ square feet per month (in 1,000s).

9. Do your supply and demand curves intersect at PE and QE found in question 8 above? Should they?

10. At the equilibrium point in question 8, compute consumer, producer, and social surpluses:

CS = $____________

PS = $____________

SS = $____________

11. Suppose New Orleans suffers a serious recession that causes average monthly income to fall from $1,500 to $1,100 per month. If other things remain the same, the demand for new housing in New Orleans is now:

Qd = _______________________.

Plot this new demand curve in the figure below. Label it D'.

12. Suppose that because of the recession in New Orleans, the wage rate for construction workers falls to $8 per hour. If other things remain the same, the supply of new housing in New Orleans is now:

Qs = _______________________.

Plot this new supply curve in the figure. Label the new supply curve S'.

13. After income falls to $1,100 and wages fall to $8, new equilibrium price and quantity are

PE = $__________ per square foot QE = __________ square feet per month (in 1,000s)

Housing Market in New Orleans