# AB 204 AB204 AB/204 Unit 3 Assignment Supply and Demand Model and PPF (Kaplan)

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AB 204 AB204 AB/204 Unit 3 Assignment Supply and Demand Model and PPF (Kaplan)

1) The table below indicates the total quantity supplied and demanded of flashlights at different price levels.

Draw Supply and Demand Curves.

What are the equilibrium price and the equilibrium quantity?

Suppose the market price is \$5. What problem would exist in the market? Does it lead to surplus or shortage? How do you expect this problem will affect the price? Indicate this on the supply and demand graphs.

Assume the market price is currently \$2. What problem would occur in the market due to this price? Will it be shortage or surplus? What will its effect on the price? Indicate this on the supply and demand graph.

2) Consider supply and demand schedules for Alaska Salmon indicated in the following tables to answers questions from a –d below.

Referring to the schedules of supply and demand, what is the equilibrium price of Salmon? What is the equilibrium quantity of salmon demanded and supplied at the equilibrium price?

Second, assume that Alaskan Salmon can also be sold in UK. The UK demand schedule for salmon is as follows:

Refer to the combined U.S. and UK demand schedule, the U.S. demand schedule and the supply schedule, and analyze the change in the market for salmon .What will happen to the price at which fishermen can sell salmon? What will be the final output of salmon?

After UK joins the market demand for salmon, what will happen to the price U.S. consumers pay for salmon? What will happen to the quantity of salmon consumed by U.S. consumers?

3) Assume Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fresh fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish.

Is it feasible for Atlantis to produce 500 pounds of fish and 800 pounds of potatoes? Explain.

Calculate the opportunity cost of increasing the annual output of potatoes from 800 to 1000 pounds.

Calculate the opportunity cost of increasing the annual output of potatoes from 400 to 600 pounds.

What is the difference between the answers to parts b and c?

What does the change in opportunity costs indicate about the slope of the production possibility frontier?

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