In Country Faraway, cigarettes are forbid,so people trade cigarettes in a black m The cigarette demand is QD = 12 − P , and the cigarette supply is Qs = 2P (a) Find the equilibrium price and quantity in the black market (b)If a price of 7 and 2 were charged what is the excess demand or supply at the given prices?

In Country Faraway, cigarettes are forbid,so people trade cigarettes in a black m The cigarette demand is QD = 12 − P , and the cigarette supply is Qs = 2P (a) Find the equilibrium price and quantity in the black market (b)If a price of 7 and 2 were charged what is the excess demand or supply at the given prices?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 5CQQ

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Question

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1. In Country Faraway, cigarettes are forbid,so people trade cigarettes in a black m The cigarette demand is QD = 12 − P , and the cigarette supply is Qs = 2P

(a) Find the equilibrium price and quantity in the black market

(b)If a price of 7 and 2 were charged what is the excess demand or supply at the given prices?

2.Explain Production possibility frontier with an example and give explanation on why it is represented as a curved diagram(concave)

3. If the price falls from 6 to 4, the quantity demanded rises from 8000 to 12000.

a) Calculate the price elasticity of demand

b) What happens to turnover (Price * Quantity) due to the price change?

Defintion Defintion Curve that represents the graphical relationship between the total supply of goods and services and the price level in the economy. When the price level increases, producers tend to supply more of a product in the market to earn a higher revenue or vice versa.

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