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the essentials of demand and supply
were imposed during World War II exacerbated the New York City housing shortage during the 1960s and 1970s. 3.10 Explain what is meant by the rationing function of prices. 3.11 Discuss the possible effect of a price ceiling. 3.12 The use of ration coupons to eliminate a shortage can be effective only if trading ration coupons is effectively prohibited. Explain. 3.13 Scalping tickets to concerts and sporting events is illegal in many states. Yet, it may be argued that both the buyer and seller of “scalped” tickets benefit from the transaction. Why, then, is scalping illegal? Who is really being “scalped”? Explain. 3.14 The U.S. Department of Agriculture (USDA) is committed to a system of agricultural price supports. To maintain the market price of certain agricultural products at a specified level, the USDA has two policy options. What are they? Illustrate diagrammatically the market effects of both policies. 3.15 Minimum wage legislation represents what kind of market interference? What is the government’s justification for minimum wage legislation? Do you agree? Who gains from minimum wage legislation? Who loses? 3.16 Explain the allocating function of prices. How does this differ from the rationing function of prices?
CHAPTER EXERCISES 3.1 Yell-O Yew-Boats, Ltd. produces a popular brand of pointy birds called Blue Meanies. Consider the demand and supply equations for Blue Meanies: QD, x = 150 - 2Px + 0.001I + 1.5Py QS, x = 60 + 4Px - 2.5W where Qx = monthly per-family consumption of Blue Meanies Px = price per unit of Blue Meanies I = median annual per-family income = $25,000 Py = price per unit of Apple Bonkers = $5.00 W = hourly per-worker wage rate = $8.60 a. What type of good is an Apple Bonker? b. What are the equilibrium price and quantity of Blue Meanies? c. Suppose that median per-family income increases by $6,000. What are the new equilibrium price and quantity of Blue Meanies? d. Suppose that in addition to the increase in median per-family ncome, collective bargaining by Blue Meanie Local #666 resulted in
