Assignment 2, Module 3: Supply, Demand, and Equilibrium 1. What are the assumptions behind the market demand curve? 2. What are the assumptions behind the market supply curve? 3. Draw a market supply curve and a market demand curve for a hypothetical widget market. Label the equilibrium price p* and the equilibrium quantity q*. 4. For a hypothetical widget market, label on the graph you drew above a price "P1" that is above the equilibrium price. Using dotted lines, indicate the quantity demand "Qd1" and the quantity supplied "Qs1", corresponding to price "P1". How would you describe this market situation? 5. Suppose there was a market surplus in the widget market. Explain thoroughly the process by which the market would move to the equilibrium. 6. Use a graph with market supply and demand functions to demonstrate the impact of an increase in income. 7. Use a graph with market supply and demand functions to demonstrate the impact of outlawing some technology used by firms in that market that increased productivity, and for which there is no substitute. 8. What is the difference between the laws of supply and demand and the theory of supply and demand? Explain thoroughly.