ECON 103 – Assignment 2/Exam review
1. Given the straight-line demand curve:
(a) Find the elasticity of demand between P=6 and P=7.
(b) Find the elasticity of demand between P=2 and P=3.
(c) Is demand more responsive to the change in price in part A or part B?
(d) Is demand elastic or inelastic in parts A and B?
2. Consider the following graph for the market of soybeans.

Calculate consumer and producer surplus
Show how a binding price ceiling would affect consumer and producer surplus. (Just like in the example, without numbers just labels)

3. Consider the labor market for housekeepers.
Show the market in equilibrium, clearing at $4
Show the effects of a minimum wage of $3.50(on the same graph).
Show the effects (separate graph) of a minimum wage of $7.50.
(d) Given the changes in the graph (c), label the change in worker (seller) surplus and the change in firm (consumer) surplus.

4. The country of Vin currently has no tax on gas, but they are wondering whether they should impose a $1.00 (in Vin dollars) per gallon tax on sellers of gas. There are two regions of Vin, which are separated by a large mountain chain. Currently, gas sells at $2.50 a gallon in both regions and the supply curve for gas in both markets is identical. In the east region, however, there are well-developed public transportation alternatives to cars and many consumers of gas would easily be able to move to public transportation. In the west, the population is more spread out so there is little public transportation and the citizens are highly dependent on their cars and gas.
Show graphically the impact of a gas tax on the market for gas in each of Vin’s
two regions, making sure to identify the new quantity of gas sold, the price buyers pay and the price sellers receive. Briefly explain the difference in the impacts in the regions.
(b) In which region would the imposition of the gas tax cause a larger deadweight loss? Indicate on your graph…