10 short question in Microeconomics Demand and Supply
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DEMAND AND SUPPLY WORKSHEET
1. The following set of questions refers to consumer demand for a product or service:
a. What are the two basic variables of a demand schedule and curve?
b. What is the law of demand?
c. Why does a demand curve slope downward?
d. According to the law of demand, what is the only thing that will cause a change in the quantity
demanded of a good or a service?
e. What are the five determinants of demand listed in the text?
2. Explain and illustrate graphically by drawing the appropriate shift in the demand curve for each of the
following products or services in terms of the situation described. Use the graphs that are provided for
you, and which can be found at the bottom of the list of the situations described. Use graph (a) for
situation (a), graph (b) for situation (b), etc.
a. Because of rising gasoline prices, consumers decide that they want to buy more gasoline/electric
hybrid automobiles. How does this affect the demand curve for hybrid automobiles?
b. What is the effect of an increase in consumers’ incomes on the demand curve for iPods (a normal
good)?
c. What is the effect of a decrease in consumers’ incomes on the demand curve for used clothing (an
inferior good)?
d. What is the effect of a decrease in the price of Corn Flakes cereal on the demand for substitute good
Wheaties?
e. What is the effect of a decrease in the price of DVD players on the demand for DVD’s (a
complementary good)?
f. Hasbro Toy Company closes down its Pawtucket, RI, plant and 100 people who were employed by
Hasbro and who were consumers of home heating oil move to other states. What is the effect of this
development on the demand curve for home heating oil in Rhode Island?
g. What is the effect of an increase in the price of milk on the demand curve for high definition (HD)
television sets?
(a)
D
(b)
D
Hybrid automobiles
(d)
D
(e)
Wheaties
(c)
iPods
D
(f)
DVD’s
D
Used clothing
D
Home heating oil
(g)
D
HD Televisions
3. The following set of questions refers to the producer supply of a good or a service:
a. What are the two basic variables of a supply schedule and curve?
b. What is the law of supply?
c. Why does a supply curve slope upward?
d. According the law of supply, what is the only thing that will cause a change in the quantity
supplied of a good or a service?
e. What are the six determinants of supply listed in the text?
4. Explain and illustrate graphically by drawing the appropriate shift in the supply curve for each of the
following products or services in terms of the situation described. Use the graphs that are provided for
you, and which can be found at the bottom of the list of the situations described. Use graph (a) for
situation (a), graph (b) for situation (b), etc.
a. As the popularity of bottled water continues to rise, more companies enter the bottled water industry.
What happens to the supply curve for bottled water?
b. The cost of jet fuel increases, forcing the airlines to cancel some routes. What is the effect of this
increase in the cost of production on the number of airline flights being offered to consumers?
c. How does a new cost-reducing technological improvement in the production of fuel for automobiles
made from corn affect the market supply of this type of fuel?
d. The federal government puts a subsidy on corn that can be processed into fuel. How does that subsidy
affect the market supply of corn?
e. The federal government offers a large tax credit to firms who produce wind-powered turbines that can
be used to generate electricity. What is the effect on the supply of wind-powered turbines?
f. Coffee producers in Brazil anticipate that they can get higher prices for coffee in the future. How may
that expectation affect the current production of coffee beans.
(a)
S
(b)
S
Bottled Water
(d)
S
Corn
(c)
S
Airline flights
(e)
Corn-based fuel
S
Wind-powered turbines
(f)
S
Coffee
5. Suppose that the total market demand for wheat and the total market supply of wheat per month in the
Kansas City grain markets are as follows:
Thousands
Price
Thousands
Surplus (+)
of Bushels
per
of Bushels
or Shortage (-)
demanded
Bushel
Supplied
and Amount
1000
$6.50
700
___________
950
$7.00
750
___________
900
$7.50
800
___________
850
$8.00
850
___________
800
$8.50
900
___________
750
$9.00
950
___________
a. What will be the market (equilibrium) price? What is the equilibrium quantity?
b. Fill in the amount of the surplus or shortage and indicate whether there is a surplus (+) or a
shortage (-).
6. Use the following graph, which shows the local market demand and supply curves for lobsters, to answer
the questions below the graph:
Price
D
S
$12————————-9———————6——————————–3——————————————-0
200
400
600
800
Quantity (pounds)
a. What is the equilibrium price and what is the equilibrium quantity? P = $ ____ Q = _______ pounds
b. At a price of $12, is there a surplus or shortage of lobsters, and how much is the surplus or shortage?
Surplus or Shortage? _______________ How much? ____________
c. At a price of $3, is there a surplus or shortage of lobsters, and how much is the surplus or shortage?
Surplus or Shortage? _______________ How much? ____________
7. Show how each of the following changes in demand and/or supply affects equilibrium
price and equilibrium quantity in a competitive market by first drawing the appropriate
curve shift or shifts. Then state specifically whether price and quantity increase, decrease,
or are indeterminate.
(a)
D
S
(b)
P
D
S
(c)
P
D
S
P
(d)
D
S
P
Q
Supply decreases,
Demand constant
Q
Demand increases,
Supply constant
Q
Supply increases,
Demand constant
Q
Demand decreases,
Supply constant
Price __________
Quantity __________
Price ___________
Quantity ___________
Price __________
Price ___________
Quantity ___________ Quantity ___________
(e)
D
S
(f)
P
D
S
(g)
P
Q
D
S
(h)
P
Q
D
S
P
Q
Demand increases,
Supply increases
Demand decreases,
Supply decreases
Demand increases,
Supply decreases
Price __________
Quantity ___________
Price ___________
Price ___________
Quantity ____________ Quantity ___________
Q
Demand decreases,
Supply increases
Price ___________
Quantity _________
8. Use the following graph, which represents the demand and supply conditions in the market for milk, to
answer the questions listed to the right of the graph.
Price
D
S
$4
a. Suppose that the government decides that the $4 price per
gallon for milk is too low for the farmers and imposes a
a floor price of $4.50 on milk. What are the effects of this
action? _______________________________________
b. Draw the price support on the graph and indicate the
shortage or surplus that results from this action.
(gallons, millions)
10
9. Use the following graph, which represents the demand and supply conditions in the market for gasoline, to
answer the questions listed to the right of the graph.
Price
D
S
4.50
a. Suppose that the federal government decides that
gasoline prices are too high for consumers and
imposes a ceiling price of $4.00 on it. What are the
effects of this ceiling price? ___________________
__________________________________________
50
b. Draw the ceiling price on the graph and indicate the
shortage or surplus that results from this action.
(gallons, millions)

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