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Economics: Demand and Supply Questions

1. If the interest rate is 5% and cash flows are $100 at the end of year one and $200 at the end of year two, then the present value of these cash flows is
A. $256.20 B. $325.50 C. $439. D. 276.65
Show all work. The use of the time line is useful in explaining your answer.

2. If you put $2400 in a savings account at an interest rate of 2%, how much money will you have in one year?
A. $48.0 B. $2880.0 C. $2352.94 D. $2448.
Show all work. The use of the time line is useful in explaining your answer.

3. Apples and oranges are substitutes. A freeze in Florida destroys most of the orange crop. What would you expect to happen to the market ( price and quantity) for each of the following:
(Hint: Use the demand curve and supply curve to draw conclusion with respect to the impact on the price and quantity following the freeze).

a. Oranges?
b. Apples?
c. Orange juice?

4. Suppose market demand and supply are given by Qd = 30 - 3P and QS = 5 +2P.
a) Solve for the equilibrium price and quantity. Show your work!
b) Draw the demand and supply curve and show the equilibrium values obtained in part a)
Show Work!

5. In a competitive market, the market demand is Qd = 96 -10P and the market supply is Qs = 14p. A price ceiling of $5 will result in a shortage of
36 units 24 units
16 units None of the above
Show your work! Using market demand and Market supply diagram!

6. Graphically, a report indicating the health defects from consuming extra ounces of whole grains per day increases the chances of cancer by 30% will cause the demand curve for grains to :
a. Shift rightward
c. Shift leftward
b. Become flatter
d. Become steeper
Show your work using the tools of demand and supply curves!

7. Consumer surplus is the difference between the
a. Market price and the minimum price required to induce production
b. The maximum willingness to pay of consumers and the market price
c. Quantity demanded and the quantity supplied at the market price
d. Full economic price and the minimum price required to induce production
Show your work please

8.
a) What is scarcity? Can it be eliminated? Explain
b) Why does scarcity exist? How can it be resolved? Explain
c) IS there such a thing as a free lunch? Yes No. Explain

Solution Summary

The problem set deals with issues under economics: Demand and Supply curves. The question set will be useful to economics and accounting students.

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