The table below shows hypothetical market demand and supply schedules for cranberries.
Price
Quantity Demanded
Quantity Supplied
($ per kg)
(millions of kg per year)
(millions of kg per year)
D
S
4.00
O
4
3.50
WU
3.00
2
2
2.50
3
2.00
4
O a. Draw a graph showing the demand and supply curves, D and S. Plot only the endpoints to draw the demand curve (D) and the supply
A
Market Supply and Demand
D
for Cranberries
4.0
3.5
3.0
2.5
Price ($ per litre)
2.0
1.5
1.0
0.5 .
0.0
0
Quantity (millions of litres per year) b. Before government intervention equilibrium price is $ |:| and equilibrium quantity is |:| million kilograms per year. Enter your
responses for prices rounded to 2 declmal places. c. The initial consumer surplus in this market is $ |:| million and the initial producer surplus is $|:| million. d. Certain producers in this market are given exclusive rights to sell cranberries and they choose to restrict quantity supplied to 1
million kilograms per year. The new equilibrium price becomes $ |:| and the new equilibrium quantity becomes |:| million kilograms. e. The transfer of consumer surplus to producer surplus resulting from this policy is $ million and the deadweight loss is $
million. f. Due to this policy consumers are {Click to select] v and producers still operating in the ma ket are (Click to select] v . g. The deadweight loss resulting from the output restriction is a dollar estimate of how much O consumers are made worse off.
0 producers who are still in the market are made worse off.
0 producers who have lost the right to operate in this market are made worse off. 0 society as a whole is made worse off. The Lorenz curve is usually based on incomes after transfer payments but before personal income taxes are paid.
The table below shows the income shares going to each one-fifth of Canadian households before government transfer payments and
personal income taxes and after the receipt of transfer payments and the payment of personal income taxes.
Income Shares Going to Each One-fifth of Canadian Households
Share of Income before
Share of Income after
Transfer Payments and Taxes
Transfer Payments and Taxes
(2008, %)
(2008, %)
Lowest 20%
Second 20%
7
Third 20%
15
16
Fourth 20%
25
24
ghest 20%
52
44
Source: Statistics Canada, the Statistics Canada CANSIM database, http://www5/statcan.gc.ca/cansim/, Table 202-0701. Accessed
January 31, 2014. a. Using the data above, create a graph giving two Lorenz curves: one using income shares prior to transfer payments and personal
income taxes and another after both transfer payments and personal income taxes. Use the tools given below to plot 6 points for each curve,
Including the origin point. Plot a total of 12 points below.
A
Lorenz Curve
Before and after redistribution
Before
Redistribution
100
After
80
Redistribution
80
70
60
50
Cumulative Share of Income (% )
40
30
20
10
20
40
60
80
100
Households (%) The table below shows hypothetical market demand and supply schedules for apartments in a particular community.
Price
Quantity Demanded
Quantity Demanded
Quantity Supplied
($ per
(thousands of units
(thousands of units
(thousands of units
month)
rented per month)
rented per month)
rented per month)
Do
D1
S
1,200
O
4
1,000
2
3
800
2
3
600
4
O –
400
4
5 a. Draw a graph showing the demand and supply curves Do and S. Plot only the endpoints of the demand curve (Do), the supply curve (S), and the
demand curve (D1) for part (h).
A
Market Supply and Demand
for Apartments in a particular community
Do
1600-
S
1400-
1200
1000-
800
Price ($ per month)
800
400
200 –
Quantity (thousands of units rented per month) b. In the absence of government intervention the equilibrium price rent is $ |:| and the equilibrium quantity is |:| thousand
un’rts. Enter your responses as whole numbers. c. The government imposes a $600 maximum rent in this market. The new quantity associated with this maximum rent of $600 is thousand units and there is a [Click to select) v of
thousand units. d. Before controls the consumer surplus is $ thousand and the producer surplus is $ |:| thousand. e. After controls the consumer surplus is $|:|thousand and the producer surplus is $ |:|thousand. f. Due to the policy the consumer surplus {Click to select] v and the producer surplus (Click to select} v . Therefore tenants who are able
to find units at the ceiling price are made (Click to select} v and landlords are made (Click to select} v . g. The total deadweight loss created by the policy is $ |:|thousand. h. An increase in the price of single-family dwellings in the community causes the demand for apartments to shift from Do to D1. Draw this demand curve on your graph. With D1, there is a of|:|thousand units. The table below shows the share of income received by each fifth of income earners, from lowest to highest, in three hypothetical
countries.
1
2
3
4
5
(lowest)
(highest)
Country 1
9
14
18
23
36
Country 2
5
10
15
25
45
Country 3
7
11
17
24
41
a. Calculate the cumulative distribution of income among the five groups of income earners in each country. Enter your responses below
rounded to a whole number.
1
2
3
4
5
(lowest)
(highest)
Country 1
Country 2
Country 3 b. Draw a graph showing the three countries’ Lorenz curves. Plot 6 points for each curve, Including the origin point (0, 0), for a total of 18 points plotted
below. To manually enter plotting coordinates click on a line segment between 2 points then click on the widget icon to bring up the curve properties box.
Lorenz Curve
For three countries
Country 1
100
Country 2
80 –
Country 3
60 –
Cumulative Share of Income (% )
40 –
20
0
20
40
60
80
100
Households (%)
