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Drawing market graphs and calculating equilibrium

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1. Rochester Metro Area was hit with a major ice storm in 2003. Assume that before the ice storm of 2003, the weekly demand and supply for ice in the Rochester Metro Area were given by the following equations:

Dpre: P = 100 - Q
Spre: S = 5 + 0.5Q

a. Draw a graph representing the Rochester ice market before the storm, and label it carefully. What was the equilibrium price for the Rochester ice market before the storm? What was the total quantity of ice traded?

b. As a result of the ice storm, electricity went out in the Rochester area. The demand for ice increased due to the lack of electricity to power refrigerators. The lack of power also caused the supply to decrease. Ice producers were still able to produce some ice using electric generators. Other ice had to be imported from other areas with power. The relevant post storm equations are the following:

Dpost: P = 110 - Q
Spost: P = 10 + 2Q

Draw a graph representing the Rochester ice market after the storm, and label it carefully. What is the new equilibrium price? What is the quantity?

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Solution Summary

This solution shows how to use Microsoft Excel to draw graphs representing the ice market in the Rochester Metro Area before and after an ice storm, and to calculate the equilibrium price and quantity.

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1- Office building maintenance plans call for the stripping, waxing, and buffing of ceramic floor tiles. This work is contracted out to maintenance firms, and both technology and labor requirements are very basic. Supply and demand conditions in this perfectly competitive service market in New York are: Supply: Qs = 2P - 20 Demand: Qd = 80 - 2P Where Qs and Qd are measured in thousands of hours of floor reconditioning per month, and P is the price per hour. A. Algebraically determine the market equilibrium price and equilibrium output combination. B. Use a graph to confirm your answer using Excel. Helpful Directions for drawing S and D graphs: To draw the supply and demand graphs in Excel, I suggest you create a table with 3 columns in Excel by following these basic steps: I-Label the columns in your table as: Price, Qd, Qs For the price column: II-Fill in the price column with prices 10, 15, 20, 25, 30, 35, 40 III-Calculate Qd column by substituting the prices in Qd equation given above. IV-Calculate Qs column by substituting the prices in Qs equation given above. V- Highlight the table including the labels and click on the Chart Wizard in Excel to draw the graph. 2. The figure below shows a firm in a perfectly competitive market: a. Find the price below which the firm will go out of business. b. What is the firmâ??s long run supply curve?

1- Office building maintenance plans call for the stripping, waxing, and buffing of ceramic floor tiles. This work is contracted out to maintenance firms, and both technology and labor requirements are very basic.
Supply and demand conditions in this perfectly competitive service market in New York are:

Supply: Qs = 2P - 20
Demand: Qd = 80 - 2P
Where Qs and Qd are measured in thousands of hours of floor reconditioning per month, and P is the price per hour.
A. Algebraically determine the market equilibrium price and equilibrium output combination.
B. Use a graph to confirm your answer using Excel.

Helpful Directions for drawing S and D graphs:
To draw the supply and demand graphs in Excel, I suggest you create a table with 3 columns in Excel by following these basic steps:

I-Label the columns in your table as: Price, Qd, Qs For the price column:
II-Fill in the price column with prices 10, 15, 20, 25, 30, 35, 40
III-Calculate Qd column by substituting the prices in Qd equation given above.
IV-Calculate Qs column by substituting the prices in Qs equation given above.
V- Highlight the table including the labels and click on the Chart Wizard in Excel to draw the graph.

2. The figure below shows a firm in a perfectly competitive market:
a. Find the price below which the firm will go out of business.
b. What is the firmâ??s long run supply curve?

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