EC 102 Principles of Microeconomics

Workshop 1

1. Determinants of Demand and Supply

For each of the following draw a demand curve and a supply curve for the product in question and shift the appropriate curve on the basis of the information given. Explain your answer.

a. Consider the market for skis in Colorado. Suppose the price of lift tickets at ski resorts in Colorado increase.

b. Consider the market for mountain bikes in Colorado. Suppose 1,000 people move from California to Colorado in one year.

c. Consider the market for orange juice. Suppose a frost in Florida destroys a substantial amount of this year's orange crop.

d. Consider the market for cars in the U.S. Suppose the U.S. government increases the gas tax.

e. Consider the market for personal computers. Suppose the price of pentium chips decreases.

f. Consider the market for red wine in the U.S. Suppose reports appear in the press that drinking moderate amounts of red wine is good for a person's health.

g. Consider the market for recycled paper. Suppose a technological improvement occurs in the recycling process.

h. Consider the market for hamburger meat. Suppose an outbreak of E-coli is traced to contaminated hamburger meat.

i. Consider the market for dry-wall (a building material) in Fort Collins. Suppose a flood occurs in Fort Collins that creates substantial property damage.

j. Consider the market for season tickets to CSU football games next year. Suppose CSU wins the WAC championship this year.

2. Determination of Equilibrium Price and Quantity in a Market

For each of the following draw a supply and demand diagram and show what happens to equilibrium price and quantity on the basis of the information given. Explain your answer.

a. Consider the market for turkeys. What happens to the market around Thanksgiving?

b. Consider the market for lift tickets at Breckenridge. What happens to the market when the price of lift tickets at Vail decreases?

c. Consider the market for Fat Tire beer. What happens to the market when New Belgian Brewing Company, the brewery that makes Fat Tire, moves to a new production facility that has much greater capacity and is more high tech.

d. Consider the market for organic fruit and vegetables. What happens to the market if a technological improvement in organic pest management occurs at the same time that news reports come out on the harmful effects of pesticides used to grow non-organic fruit and vegetables.

e. Consider the market for restaurant meals in Fort Collins. What happens to the market if the number of restaurants increases at the same time that a company closing in Fort Collins leads to thousands of people being laid-off from their jobs.