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Suppose we model the market for temporary tattoos. There are 4 buyers and 4 sellers in a (more or less) competitive market.

1. Copy and paste the data into Excel (or, do it by hand). Tabulate market demand and supply, plot these curves, and add a linear trend line for each. Make sure there is one figure that shows both supply and demand together. Give me a function that approximates the demand and supply trends that you plot.

1. Estimate the equilibrium price and quantity in this market (hint: use the trend lines). Prices are in dollars $ and tattoos are in each.

1. What consumers appear to have the highest willingness to pay for temporary tattoos? Is there a consumer that seems to have a fairly inelastic demand for tattoos?

1. Calculate own price elasticity of demand for tattoos for when the price increases from $1 to $1.50 (hint: |e|=%?Q/%?P). Use the midpoint formula). Is market demand elastic, inelastic, or unit elastic?

1. If the advertising elasticity of demand is 3.4, what effect will a 1% change in ad spending have on quantity demanded in this market? Is demand ad sensitive?

1. This is your chance to be creative. Give me a quick story or scenario in which there might be a negative supply shock to the temporary tattoo market. What do you predict the effect to be on equilibrium price and quantity? Show in your figure (draw/sketch a new trend line in to illustrate).

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1. What is a potential long-run condition brought about by this shock? As profits in this market trend upward after your shock, what do you expect to happen to the market structure in the long-run? Be specific (there are numerous correct answers).