ECON 1100: Intermediate Economics 2022
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ECON 1100: Intermediate Economics
Assignment #1
2022
Answer the following questions clearly and completely. Be sure to show your work - we need to be able to see how you arrived at your answers so that we can understand your thought process and give full (partial credit if warranted). Be sure to upload your assignment to Gradescope before the deadline . You are welcome and encouraged to work in groups as long as the work you hand in is your own! Do not hesitate to stop by office hours if you have any questions or merely wish to talk through any aspect of the problems. Work hard and good luck!
1. Congratulations, you’ve been hired as a market analyst for the Federation of Quebec Maple Syrup Producers (QMSP) and you will be responsible for monitoring the market for maple syrup . The market can be described by the following calibrated demand and supply functions:
Qd = 1180 − 20P +2Pl
Qs = 50P-200
where 
is the price of a 16oz bottle of syrup, 
is the price for a bottle of maple flavored corn syrup, and Qd and Qs are the quantity demanded and the quantity supplied of maple syrup.
(a) How much maple syrup should the QMSP be prepared to give away if they decided to give maple syrup to
everyone who wants it free of charge as a marketing ploy? (Hint: your answer will depend on 
) Find the inverse demand and inverse supply equations . Determine the highest price at which suppliers would not be willing to sell any syrup.
(b) Assuming that Pl = 10, graph (inverse) supply and (inverse) demand for the market with a clearly labeled graph
andcalculate theequilibrium price (P*) and quantity (Q*) for the market. Be sure to find and graph the points where the curves intersect the axes.
(c) Using calculus, find an expression for the impact of a small price change of maple flavored corn syrup on the quantity demand of maple syrup (note: we are asking only about a characterization of demand, not a change in the equilibrium). Provide a brief interpretation of your numerical result (no more than two sentences).
(d) Now suppose that corn syrup becomes more expensive due to a corn blight and makes the price of maple flavored corn syrup rise (Pl = 45). Maple syrup producers are ecstatic, thinking this will allow them to significantly raise the price of their own syrup. Calculate the new equilibrium price (P**) and quantity (Q**) for maple syrup . Illustrate the changes on your graph from part (a). Are the maple syrup producers right?
2. Consider the following general linear demand and supply functions that represent a market:
Qd =Z − GP
Qs = D +EP+ CS
where P is the price, S is a variable denoting the average amount of production shipping costs, and Qd and Qs are the quantity demanded and the quantity supplied. Assume D, E, G, and Z all have values greater than zero.
(a) What equation (in addition to equations 3 & 4) completes our mathematical model of market equilibrium? (b) Identify the parameters, endogenous variables, and exogenous variables in the above system of equations.
(c) Derive expressions for the equilibrium market price (P∗) and quantity (Q∗) and illustrate your answers with a graph. Be sure to specify the symbolic values of the demand and supply curves where they intersect with the P-axis and Q-axis in the positive quadrant.
(d) Given your results from part (a), use calculus to determine the effect of a small increase in shipping on the equilibrium price (P*). What is the sign of the expression you find? Be sure to briefly describe the logic you use to determine whether C is positive or negative.
2022-01-19