Question 2 a. In the summer, which is the peak season for tourists, the price of hotels is typically higher than it is in the winter. In the case of onions however, the reverse is true: The price of onions is lower in the peak season than it is in the summer season. How do we explain this seeming contradiction? [3 marks] b. Identify and explain the errors found in the following statements: i. Demand decreases, causing prices to fall. Lower prices cause demand to increase. Therefore, prices increase to their original levels. [2 marks] ii. The supply of cereal in China increases, causing cereal prices to fall. Lower prices always mean that Chinese households spend more on cereal. [2 marks] c. The market for chicken is shown below. Equilibrium price and quantity are $15 and 8 chicken, respectively. Assume that the price of grains decreases (grains is an important input for chicken harvesting). Explain the adjustment process in the chicken market after the shock to the new equilibrium. [5 marks] demand quantity Question 3 a. The municipal corporations in most parishes in Jamaica have initiated a program to charge residents for garbage disposal based on the number of cans filled per week. The parish of Kingston decided to increase its per can price from $500 to $750 per week. In the first week, it was found that the number of cans that were brought to the curb fell from 500 to 450 (although the workers complained that the cans were heavier). The chief economist ran the numbers, informed the mayor that the demand for disposal was inelastic, and recommended that the price be raised to maximize town revenue from the program. Four months later, at a price of $1000 per can, the number of cans has fallen to 125 and town revenues are down. What might have happened? [3 marks] b. Using the midpoint formula and the graph below, calculate the following;: i. The price elasticity of demand when the price changes from 9 to 15; and ii. The price elasticity of supply when the price changes from $4 to $9. [6 marks]| Price ($) Supply Demand R i T e i W p R = Quantity c. Using the table below calculate the cross-price elasticity of flour with respect to rice [4 marks]