Problem set 5

1. A. Use the following unit value and unit cost schedules to calculate the theoretical market demand and market supply functions. Label each step of the two market functions with the corresponding buyer or seller number whose unit value or unit cost (for a 1 st or 2nd unit) corresponds to that step. Unit Values Unit Costs 1 st 2nd 1 st 2nd B1 144 133 S1 142 B2 163 146 121 S2 140 B3 154 147 142 S3 134 B4 147 154 108 S4 126 167 B5 167 97 $5 121 172 B6 161 105 S6 116 177 B. Show the competitive equilibrium price prediction implied from the market demand and supply functions of Part A. 2. Explain how we could use Question 1 to do a new experiment where market supply shifts up while market demand remains constant