[15#marks] Consider the market for bananas. Show and!explain what happens to consumer and producer surplus in the banana market if a cyclone!

1. [15#marks] Consider the market for bananas. Show and!explain what happens to consumer and producer surplus in the banana market if a cyclone!destroys 50% of the banana farms in Australia (assume we do not import bananas).

2. [25 marks] Consider Scott who buys two goods – shoe and t-shirts. The price of shoes is $30 per pair and the price of t-shirts is $25 each. Scott has a budget of $300.

a. Draw Scott’s budget constraint,

labeling all the relevant points.

b. What is the opportunity cost of a pair of shoes?

c. What is the opportunity cost of a t-shirt?

d. If the price of a t-shirt doubles:

i. What happens to Scott’s!budget constraint – draw and explain.

ii. What happens to the opportunity cost of shoes and t- shirts – explain.

iii. Is Scott better or worse off? Explain

Does anyone answer these questions ? If you answer how much do you need?

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