Empirical Project 7 Solutions

These are not model answers. They are provided to help students, including those doing the project outside a formal class, to check their progress while working through the questions using the Excel, R, or Google Sheets walk-throughs. There are also brief notes for the more interpretive questions. Students taking courses using Doing Economics should follow the guidance of their instructors.

Part 7.1 Drawing supply and demand diagrams

Year log (Q) log (P) Q P
1930 4.45 4.76 85.51 116.95
1931 4.36 4.61 77.99 100.93
1932 4.20 4.37 66.99 78.89
1933 4.03 4.53 56.37 92.90
1934 4.10 4.64 60.12 104.00
1935 4.20 4.56 66.38 95.94
1936 4.14 4.85 62.52 127.94
1937 4.26 4.66 70.96 105.93
1938 4.26 4.69 70.80 108.90
1939 4.14 4.78 63.10 118.85
1940 4.35 4.69 77.09 108.90
1941 4.17 4.90 64.42 133.97
1942 4.03 5.48 56.50 239.89
1943 3.88 6.10 48.53 444.65
1944 4.26 5.91 70.80 368.14
1945 4.29 6.02 72.95 410.22
1946 4.39 5.95 80.91 383.72
1947 4.40 5.77 81.10 319.17
1948 4.30 5.96 73.79 389.06
1949 4.36 5.74 78.35 311.90
1950 4.41 5.78 82.42 322.86
1951 4.42 5.91 83.37 368.99

Solution figure 7.1 Prices and quantities of watermelons (values rounded to two decimal places).

Solution figure 7.2 Price of watermelons (USD per 1,000, 1931–1950).

Solution figure 7.3 Quantity of watermelons planted (millions, 1931–1950).

Q Log Q Supply (log P) Demand (log P) Supply (P) Demand (P)
20 3.00 3.09 6.04 22.04 421.37
25 3.22 3.47 5.86 32.20 350.91
30 3.40 3.78 5.71 43.91 302.18
35 3.56 4.04 5.58 57.06 266.30
40 3.69 4.27 5.48 71.60 238.68
45 3.81 4.47 5.38 87.47 216.70
50 3.91 4.65 5.29 104.63 198.77
55 4.01 4.81 5.21 123.03 183.83
60 4.09 4.96 5.14 142.65 171.17
65 4.17 5.10 5.08 163.44 160.29
70 4.25 5.22 5.02 185.39 150.84
75 4.32 5.34 4.96 208.46 142.55
80 4.38 5.45 4.91 232.63 135.20
85 4.44 5.55 4.86 257.88 128.64
90 4.50 5.65 4.81 284.20 122.75
95 4.55 5.74 4.77 311.56 117.43
100 4.61 5.83 4.72 339.95 112.59

Solution figure 7.4 Calculated prices and quantities (in natural logs and actual values).

Solution figure 7.5 Supply and demand diagram.

Q Log Q Supply (log P) Demand (log P) Supply (P) Demand (P) New supply (log P) New supply (P)
20 3.00 3.09 6.04 22.04 421.37 3.49 32.88
25 3.22 3.47 5.86 32.20 350.91 3.87 48.04
30 3.40 3.78 5.71 43.91 302.18 4.18 65.50
35 3.56 4.04 5.58 57.06 266.30 4.44 85.12
40 3.69 4.27 5.48 71.60 238.68 4.67 106.81
45 3.81 4.47 5.38 87.47 216.70 4.87 130.49
50 3.91 4.65 5.29 104.63 198.77 5.05 156.09
55 4.01 4.81 5.21 123.03 183.83 5.21 183.55
60 4.09 4.96 5.14 142.65 171.17 5.36 212.81
65 4.17 5.10 5.08 163.44 160.29 5.50 243.83
70 4.25 5.22 5.02 185.39 150.84 5.62 276.56
75 4.32 5.34 4.96 208.46 142.55 5.74 310.98
80 4.38 5.45 4.91 232.63 135.20 5.85 347.04
85 4.44 5.55 4.86 257.88 128.64 5.95 384.72
90 4.50 5.65 4.81 284.20 122.75 6.05 423.98
95 4.55 5.74 4.77 311.56 117.43 6.14 464.79
100 4.61 5.83 4.72 339.95 112.59 6.23 507.14

Solution figure 7.6 New supply after the shock.

Solution figure 7.7 Supply and demand after a negative supply shock.

Part 7.2 Interpreting supply and demand curves

Note: This data exercise highlights why it is necessary to calculate the elasticities of supply and demand from the data rather than simply looking at the shapes of the supply and demand curves as they appear with the chosen scales for the horizontal and vertical axes.

  1. Economic interpretation and elasticity (where relevant) of given coefficients:
  1. Economic interpretation and elasticity (where relevant) of given coefficients:
  1. Many possible examples, including: