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Assignment to prepare for Class #4

1. Illustrate the following with demand and supply curves.
1. In July, 2006, the Major League Baseball All Star Game caused an increase in demand for hotel rooms in Detroit, MI. Draw the curves for the market for hotel rooms in Detroit, MI.
2. A hurricane wiped out most of the year's orange crop. Draw the curves for the market for oranges.
3. A hurricane wiped out most of the year's tobacco crop. At the same time, new medical studies about the effects of secondhand smoke decreased demand for cigarettes. As a result, the price of cigarettes fell. Draw the curves for the market for cigarettes.
4. A new technology made it cheaper to produce computer chips. Draw the curves for the market for computer chips.
5. The market for chocolate is in equilibrium, at a price of $5.00/lb. The government then imposes a price ceiling, saying that chocolate cannot sell for more than $4.00 a pound. Draw the curves for the market for chocolate.
2. Explain what is the "law of demand". Give two different explanations for why demand curves slope downward.
3. Why do demand curves eventually intersect the vertical axis? Why do demand curves eventually intersect the horizontal axis?
4. What does it mean if hot chocolate and boots are complements?
5. What factors could cause a demand curve to shift?
6. If I had a million dollars, I would rent fewer videos and go out to the movies more often. What kind of goods does that mean the videos are for me?
7. What would cause movement along a supply curve? What would cause a supply curve to shift?
8. If there is a surplus in the market for tomatoes, what would we expect to happen to the price of tomatoes?