interactive activity PROBLEMS a. The market for newspapers in your town 1. A study conducted by Yahoo! revealed that chocolate is the most popular flavor of ice cream in America. For each of the following, indicate the possible effects on demand, supply, or both as well as equilibrium price and quantity of chocolate ice cream. Case 1: The salaries of journalists go up Case 2: There is a big news event in which is reported in the newspapers. b. The market for Seattle Seahawks cotton T-shirts your town, a. A severe drought in the Midwest causes dairy farm- ers to reduce the number of milk-producing cattle in their herds by a third. These dairy farmers sup- ply cream that is used to manufacture chocolate ice Case 1: The Seahawks win the Super Boul Case 2: The price of cotton increases. c. The market for bagels Case 1: People realize how fattening bagels Case 2: People have less time to make themselves cream. b. A new report by the American Medical Association reveals that chocolate does, in fact, have significant health benefits. cooked breakfast. c. The discovery of cheaper synthetic vanilla flavoring lowers the price of vanilla ice cream. d. New technology for mixing and freezing ice cream lowers manufacturers' costs of producing chocolate d. The market for the Krugman and Wells economic textbook Case 1: Your professor makes it required reading all of his or her students. ice cream. Case 2: Printing costs for textbooks are lowered the use of synthetic paper. 2. In a supply and demand diagram, draw the shift of the demand curve for hamburgers in your hometown due to the following events. In each case, show the effect on equilibrium price and quantity. 5. Let's assume that each person in the United States consumes an average of 37 gallons of soft drinks (nondiet) at an average price of $2 per gallon and the the U.S. population is 294 million. At a price of $1.5 per gallon, each individual consumer would demand 50 gallons of soft drinks. From this information aba the individual demand schedule, calculate the marke demand schedule for soft drinks for the prices of $13 and $2 per gallon. a. The price of tacos increases. b. All hamburger sellers raise the price of their french fries. c. Income falls in town. Assume that hamburgers are a normal good for most people. d. Income falls in town. Assume that hamburgers are an inferior good for most people. e. Hot dog stands cut the price of hot dogs. 6. Suppose that the supply schedule of Maine lobsters i as follows: 3. The market for many goods changes in predictable ways according to the time of year, in response to events such as holidays, vacation times, seasonal changes in production, and so on. Using supply and demand, explain the change in price in each of the fol- lowing cases. Note that supply and demand may shift simultaneously. a. Lobster prices usually fall during the summer peak lobster harvest season, despite the fact that people like to eat lobster during the summer more than at any other time of year. b. The price of a Christmas tree is lower after Christ- mas than before but fewer trees are sold. c. The price of a round-trip ticket to Paris on Air France falls by more than $200 after the end of school vaca- tion in September. This happens despite the fact that generally worsening weather increases the cost of operating flights to Paris, and Air France therefore reduces the number of flights to Paris at any given price. 4. Show in a diagram the effect on the demand curve, the supply curve, the equilibrium price, and the equi- librium quantity of each of the following events. Price of lobster (per pound) Quantity of lobster supplied (pounds) $25 800 20 700 15 600 10 500 400 Suppose that Maine lobsters can be sold only in United States. The U.S. demand schedule for Malik lobsters is as follows: Price of lobster Quantity of lobster demanded (pounds) (per pound) $25 200 20 400 15 600 10 800 5. 1,000