Bert, as a consumer, places the value on a pair of jeans as follows

Homework #2 for Week #3

Q.1 (40 points)  Bert, as a consumer, places the value on a pair of jeans as follows.

Value of first   pair: $70
Value of second  pair: $60
Value of third   pair: $50
Value of fourth  pair: $40
Value of fifth   pair: $30
Value of sixth   pair: $20
Value of seventh pair: $10

Ernie, as a producer, pays the following cost to produce jeans.

Cost of first   pair: $10
Cost of second  pair: $20
Cost of third   pair: $30
Cost of fourth  pair: $40
Cost of fifth   pair: $50
Cost of sixth   pair: $60
Cost of seventh pair: $70

Using the information given above, answer the following questions.

(1)  If the price is $20, how many pairs of jeans will be demanded by Bert?

(2)  If the price is $20, how many pairs of jeans will be supplied by Ernie?

(3)  Explain the reason why $30 price is not an equilibrium price.

(4)  What is behind the force that moves the price from $30 to the equilibrium level?

Q.2 (10 points)  If the price of milk rises, what will happen to the demand for gasoline?   You need to provide an explanation for a possible link between the price of milk and the demand for gasoline.