Homework

 Use the Hill Method for each of the following questions. 

 

Note: the Hill Method contains 7 steps. You have to show all the steps for each question. 

1. Draw the graph with supply and demand on it and label equilibrium price and quantity. 

2. List the determinants of supply and demand. 

3. Read the problem and ask yourself if each determinant has changed. 

4. Draw the formula (boxes) and fill in the blanks. 

5. Change the graph accordingly and label the new equilibrium. 

6. List the conclusion. 

7. Justify your conclusion. 

 

 

1. The price of tea is held above equilibrium by the government. What happens to the price and quantity of tea? (5 points) 

 

2. The price of tea is held below equilibrium by the government. What happens to the price and quantity of tea? (5 points) 

 

3. The price of tea increases. What happens to the price and quantity of coffee? (5 points) 

 

4. The price of tea decreases. What happens to the price and quantity of tea biscuits? (5 points) 

 

5. The government gives out a tax rebate. What happens to the price and quantity of all normal goods? (5 points) 

 

6. The government gives out a tax rebate. What happens to the price and quantity of all inferior goods? (5 points) 

 

7. People expect the price of tea to increase. What happens to the price and quantity of tea? (5 points) 

 

8. People start preferring Tea to coffee. What happens to the price and quantity of tea? (5 points) 

 

9. There is a baby boom. What happens to the price and quantity of diapers? (5 points) 

 

10. The cost of making plastic toys increases. What happens to the price and quantity of toys? (5 points)