Natural Resources Homework #2

Instructions:

Homework assignments are optional – there is no penalty for not completing an assignment.

If you like, you can work with other students in the class. Just turn in one assignment per group and include all names.

Each student can earn up to 1 point per homework. The point will be added to the first exam score.

E-mail your work to the class TA: Shan Zhou (shan.zhou@colorado.edu).

Or you can turn in the work at the beginning of class.

The deadline to submit your work is at the beginning of class on Friday, Oct. 23rd.

If you have any questions please ask at the beginning of class.

1) Show graphically the effect of a price support (used in agriculture). Be sure to label both quantity demanded and supplied in the domestic market.

What is the effect on output in comparison to a free market outcome?

2) Show graphically the effect of a price ceiling (used in the 1970s for natural gas and gasoline). Be sure to label both quantity demanded and supplied in the domestic market.

What is the effect on output in comparison to a free market outcome?