Problem Set #1

Economics 5310: Managerial Economics

Please submit using Blackboard drop box.

NAME: ______________________________________

1. (20 points) Comparative Statics

Explain how the following events will affect the demand and supply curves for large SUVs. In each case explain whether the demand and supply curves will (i) move to the left; (ii) move to the right; or (iii) not move.

1. (10 points) The price of steel falls.

1. How will this affect the demand curve for the good listed above? EXPLAIN WHY

1. How will this affect the supply curve? EXPLAIN WHY

1. Show how this affects the equilibrium price and quantity. Make sure your demand and supply curves follow the law of demand and supply, the curves and axes are appropriately labeled, arrows indicating movement of curves are shown, and the old and new equilibrium prices are quantities are clear.

1. (10 points) The price of gasoline decreases

1. How will this affect the demand curve for the good listed above? EXPLAIN WHY

1. How will this affect the supply curves? EXPLAIN WHY

1. Show how this affects the equilibrium price and quantity. Make sure your demand and supply curves follow the law of demand and supply, the curves and axes are appropriately labeled, arrows indicating movement of curves are shown, and the old and new equilibrium prices are quantities are clear.