Econ 1010 Micro – Using a supply-demand diagram
Homework Number 6Econ 1010 MicroName: 1. Using a supply-demand diagram, show a labor market with a binding minimum wage. Now, use thediagram to show those who are helped by the minimum wage, and those who are hurt by theminimum wage.2. The supply and demand for a given size of flat screen TVs is given by the following equations. P 1000 2Qd P 20 2Qs a. What is equilibrium quantity?b. What is equilibrium price?c. Graph the supply and demand curves below, show equilibrium and any positive intercepts,and calculate producer and consumer surplus.d. Now suppose that the state of Virginia determines that the price of these TVs is too high andimposes a maximum price of $400. Is this a price ceiling or a price floor?e. Show the market outcome in your graph from part d. (show QS and QD), and calculateconsumer, producer surplus, and deadweight loss with the imposed price.f. With the imposed price of $400, there exists a surplus/shortage (circle one) of ____________(how many TVs?).3. You hear on the news that a local politician is imposing a maximum price on watermelons because theprice is too high and “producers are very responsive to changes in price, so this should help society”. Isthe politician correct? Explain why or why not.
