There are two sections. Both need correct answers and clear workings.

1.For the following questions, evaluate the effect of the events on the equilibrium price and quantity. Draw the supply/demand diagram of each market and explain with graph. what happens in the market ?.

a)A crash of an airplane killed 120 people and the price of oil increases. What are the effects on the market of airplane tickets?

b)A virus kills 5% of all trees in North America and populations (people) in Canada increases. What are the effects on the market of chairs?

c)A cheaper production process for CPU and a new popular computer games have been released. What are the effects on the market of computers?

d)The price of gas increases and public transit in major cities expends. What are the effects on the market of cars?

Question 1

Suppose that the demand of pizzas is given byand the supply by .

a)On the same graph, draw the supply and the demand, and identify the market equilibrium.

b)Find the market equilibrium.

c)Now suppose that the demand of pizzas becomesafter consumers' income increases. Find the new market equilibrium.

d)Define what a normal good is and determine if pizza is a normal good.