Supply and Demand Practice Problems

1) Mad Cow Disease has struck to cattle market. Determine what will occur in the:
a) market for ground beef
b) market for ground turkey
2) An increase in the price of ice cream would cause what to occur in the market for
froen yogurt!
") #f there is an increase in the price of leather what will occur in the baseball glo$e
market!
%) A sudden increase in the supply of peanuts has drastically reduced the price of
peanut butter. &hat will occur to the market for 'elly!
() &hat would happen the market for restaurant pia if the price of flour increased
and the price of Chinese restaurant meals increased!
)) #f the price of D*D players fall+ what would occur in the market for *C,s!
-) Medical society has recently announced that a glass of red wine in the e$ening
can reduce the risk of heart disease. An arctic front has caused a large freee in
Central California and greatly reduced the crop of grapes. &hat will occur to the
red wine market!

Answers to Demand and Supply Practice Problems
.ro$ided are outlines of the worded answers to the Demand and /upply practice
problems. .lease practice drawing the graphs on your own.
1a) 0ne can assume that Mad cow disease has struck the cattle industry and one would
not want to consume any tainted beef. 1or that reason+ demand would immediately
decrease. 2his would be considered a 1ad or 1ashion. 2he decrease in demand is an
inward 3leftward shift of the demand cur$e and results in a decrease in price and a
decrease in 4uantity). 5ou could further argue that supply will decrease since cattle
are dying 3thus you ha$e a double shift which results in a decrease in 4uantity and an
indeterminant effect on prices.)
1b) 2urkey is a substitute for ground beef. /ince beef has drastically decreased in
demand+ one may assume that Demand for turkey has increased. 3Due to all of the
checks for tainted beef+ the supply of beef should drop+ thus increasing the price of
beef). An increase in demand is an outward or rightward shift of the demand cur$e
and results in an increase in both prices and 4uantities of ground turkey.
2) 0ne should assume that ice cream and froen yogurt are substitutes. 2hus+ if the price
of ice cream increases+ the demand for froen yogurt should increase as well. 2his
demand increase is an outward or rightward shift of the demand cur$e and results in an
increase of both prices and 4uantities.
") 6eather is an input to baseball glo$es. #f there is an increase in the price of the input
good+ the result is a decrease in supply. A decrease in supply is an inward 3leftward)
shift of the supple cur$e. 2his decrease in supply results in higher prices and lower
4uantities of baseball glo$es.
%) 0ne should assume that peanut butter and 7elly are compliments. #f the price of peanut
butter decreases then the demand for 7elly should increase. 2he increase in demand is an
outward or rightward shift of the demand cur$e and results in an increase in prices and
4uantities.
() 1irst off+ break this down. 1lour is an input for pia. An increase in the cost of flour is
an increase in the cost of an input good. 2his results in a decrease in supply. 2he decrease
in supply results in an increase in price and a decrease in 4uantity. Also+ there is an
increase in the cost of Chinese food. #f one assumes that Chinese food and pia are
substitutes+ then the demand for pia should increase. An increase in demand results in
an increase in price and an increase in 4uantity. .utting the two effects together results in
an increase in price+ but the effect on 4uantity is indeterminant.

)) #f the price of D*D8s fall+ then the demand for *C,8s should go down. 2his decrease
in demand results in a decrease in price and 4uantity.
-) ,educing the risk of heart disease is a fad or fashion that will increase the demand for
red wine 3an increase in price and 4uantity). 5et+ the freee in California+ destroys the
grape supply for red wine. 2his results in a decrease in supple 3an increase in price and a
decrease in 4uantity). 2he result of both effects is an increase in the price and an
indeterminant effect on 4uantity.