9/27/2020

Price (P), $ Quantity Quantity

demanded supplied Consider the following
(Qd) (Qs) data
• Plot the supply and demand
10 1000 100 curve with quantity on the
horizontal axis and price on
the vertical axis.
20 800 500 • Derive the intercepts and
slopes for the demand curve
Qd =a-bP and the supply
curve Qs=c+dP.
30 600 900 • Make sure that the
equations you found are
correct by plugging in P =
40 400 1300 $10 and P=$40 and verifying

Microeconomics
the quantities with the table
Seminar 2 above.
• Find the equilibrium price
and quantity.

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You are given the following information about

Consider the demand for
bottled water during the
summer months. Let
Qd=30-5P+0.01I-2R, where
Q is measured in thousands
of six-packs, P is the price
per six pack in dollars, I is
income and R is the number
of rainy days during the
summer. The supply curve is
given by Qs= -100+20P.
demand in the competitive market for bicycles.
Plot the supply and demand curves if I=$20000 Price per Quantity • Graph this demand schedule placing
and R=15. What is the equilibrium price and
quantity?
bicycle of bicycles price on the vertical axis and quantity
demanded on the horizontal axis.
per week
• Suppose the price is initially $40. If the
$100 0 price rises by $20, what happens to the
If I=$20000 and R=10, plot the new demand 80 100
curve and find the new market equilibrium. Does
quantity demanded?
the movement in Q and P make sense with the 60 200 • Suppose the price is initially $40. If the
decline in the number of rainy days from 15 to 40 500 price falls by $40, what happens to the
10? Is it necessary to shift the supply curve in quantity demanded?
20 800
order to see the supply response?
0 1000

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For each of the situations in the following table, fill in the missing information.
First, determine whether the situation causes a shift or a movement along the Suppose a market has three consumers: Joe, Maria and
demand curve, then if it causes a shift, determine whether the demand curve, David. Their demand schedules are given in the following
shifts to the right or to the left. table:
Situation Specified market Movement Rightward or
or shift leftward shift in Price Quantity Quantity Quantity • Sketch a graph of Joe’s,
demand demanded demanded demanded
People’s income increase Market for exotic vacations by Joe by Maria by David Maria’s and David’s
People’s income decrease Market for goods sold in $0 10 20 5 demand curve. Then
secondhand shops 1 8 16 4 sketch the market
Price of bicycles increases Market for bicycles 2 6 12 3 demand curve based on
Price of tennis balls increases Market for tennis racquets 3 4 8 2
Price of movie tickets decreases Popcorn at movie theater
the demand of these 3
4 2 4 1
Popularity of music playing devices Market for music-playing devices Price Quantity demanded in market
individuals.
increases
Popularity of branded clothing items Market for brand-name designer
$0 • Summarize the market
decreases clothing
1
demand curve you found
2
Winter clothing to go on sale next month Market for winter clothing
3
by filling the following
Increase in urban residents Market for apartments in urban
areas 4 table.
5 6

• At a price of $20, how many widgets are producers willing to supply?

The following • At a price of 40$, how many widgets are producers willing to supply?
graph • Suppose there are ten widget producers and that the price of widget
represents the is $50. If each widget producers produces exactly the same number
supply curve for of widgets as every other widget producer, how many widgets will
the production each producer produce at this price?
of widgets • Suppose the price is initially $30 but then falls to $20. What is the
change. What is the change in the quantity supplied?
• What price must suppliers receive to be willing to supply 80 widgets?
• What price must suppliers receive to be willing to supply 40 widgets?

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For each of the situations in the following table, fill in the missing information first,
determine whether the situation causes a shift or a movement along the supply The following table provides the demand and supply
curve; then, if it causes a shift, determine whether the supply curve shifts to the vehicles for Healthy Snacks Inc.
right or to the left. Price Quantity Quantity • Draw a sketch of the demand and supply curves for
demanded supplied
Situation Specified market Movement or shift Rightward or leftward shift in Healthy Snacks Inc.
supply $0 1,000 0
10 800 125
• From the table, what are the equilibrium price and
Labor costs for air travel and cruise Market for exotic vacations
ships increase
quantity in this market? Indicate these on your
20 600 275
graph.
Prices of office equipment and phone Market for call center 30 400 400
service rise by 40% services • Fill in the table below based on the data given to
40 200 550
Price of bicycles increases Market for bicycles you. Assume that for each row in the table, the
50 0 675 price is as given and that you are calculating the
Price of leather boots increases Market for leather belts
Price Excess Excess number of units of excess demand or supply.
New technology for music-playing Market for music playing demand supply
device revealed devices
$0
• Why is a situation of excess demand referred to as
Price of brand name designer clothing Market for brand name a shortage?
10
increases designer clothing • Why is a situation of excess supply referred to as a
20
Stock market process expected to fall Stock market today shortage?
next quarter 30
Increase in number of coffee shops Market for coffee shops in 40
owners in the metro area the metro area 50

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The competitive market for bicycles is described by the demand curve P = 2,000 –
2Q and the supply curve P=6Q. There are 20 bicycle manufacturers and each of a. A severe drought causes dairy farmers to reduce the
these manufacturers produces the same number of bicycles as every other number of milk-producing cattle in their herds by a third.
manufacturer. A study conducted by These dairy farmers supply cream that is used to manufacture
chocolate ice cream.

• Using the two equations for the Price Quantity Quantity Yahoo! revealed that
demand and supply curves, fill in the
demanded supplied
chocolate is the most
following table describing the demand $0 popular flavor of ice b. A new report by the Medical Association reveals that
and supply schedules for bicycles. 240 cream. For each of the chocolate does, in fact, have significant health benefits.

• Examine the table you created above 480 following, indicate the
and provide a range of prices that you 720 possible effects on
expect the equilibrium price to fall 960 demand, supply, or
between. Why do you expect the c. The discovery of cheaper synthetic vanilla flavoring lowers

equilibrium price to fall within the 1,200 both as well as the price of vanilla ice cream.

range? 1,440 equilibrium price and

• Sketch a graph of the demand and 1,680 quantity of chocolate
supply curves for bicycles. 1,920 ice cream. d. New technology for mixing and freezing ice cream lowers
manufacturers’ costs of producing chocolate ice cream.
• Calculate the equilibrium price and
quantity in the market for bicycles.

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In a supply and demand diagram, draw the shift of the demand curve for
hamburgers in your hometown due to the following events. In each a. The market for newspapers in
case, show the effect on equilibrium price and quantity. Show in a diagram your town
the effect on the
c. Income falls in town. demand curve,
b. All hamburger sellers Assume that
a. The price of tacos
raise the price of their hamburgers are a the supply curve,
increases.
french fries. normal good for most the equilibrium Case 1: The salaries of
people. price, and the journalists go up.
equilibrium
d. Income falls in town.
Assume that
quantity of each
hamburgers are an
e. Hot dog stands cut of the following Case 2: There is a big news
the price of hot dogs.
inferior good for most events. event in your town, which is
people. reported in the newspapers.

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c. The market for the

Show in a diagram b. The market for bagels Show in a diagram MICROECONOMICS textbook
the effect on the the effect on the
demand curve, demand curve,
the supply curve, the supply curve,
the equilibrium the equilibrium Case 1: Your professor makes it
Case 1: People realize how
required reading for all of his or
price, and the fattening bagels are. price, and the her students.
equilibrium equilibrium
quantity of each quantity of each
of the following Case 2: People have less time to of the following Case 2: Printing costs for
events. make themselves a cooked events. textbooks are lowered by the
breakfast. use of synthetic paper

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Suppose that the supply Suppose that Maine lobsters can be sold
only in the United States. The U.S.
schedule of Maine lobsters is as demand schedule for Maine lobsters is as
follows: follows:
Price of lobster Quantity of lobster Price of lobster (per Quantity of lobster
(per pound) supplied (pounds) pound) demanded
$25 800 (pounds) Now suppose that Maine lobsters can be sold in France. The French
20 700 $25 200 demand schedule for Maine lobsters is as follows:
15 600 20 400 Price of lobster Quantity of lobster
10 500 15 600 (per pound) demanded (pounds)
5 400 10 800 $25 100
5 1,000 20 300
15 500
10 700
Draw the demand curve and the supply curve for Maine lobsters. What 5 900

are the equilibrium price and quantity of lobsters? What is the demand schedule for Maine lobsters now that French
consumers can also buy them? Draw a supply and demand diagram that
illustrates the new equilibrium price and quantity of lobsters. What will
happen to the price at which fishermen can sell lobster? What will happen to
the price paid by U.S. consumers? What will happen to the quantity
consumed by U.S. consumers?

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• The accompanying table gives the

annual demand and supply
schedules for pickup trucks.
Use a diagram to a. Plot the demand and supply curves
using these schedules. Indicate the Price of Quantity of Quantity
illustrate how equilibrium price and quantity on your
diagram. truck trucks of trucks
each of the A. THE PRICE OF
MOZZARELLA CHEESE RISES.
B. THE HEALTH HAZARDS OF
HAMBURGERS ARE WIDELY
C. THE PRICE OF TOMATO
SAUCE FALLS.
b. Suppose the tires used on pickup demanded supplied
following events PUBLICIZED. trucks are found to be defective. What
would you expect to happen in the
(millions) (millions)
$20,000 20 14
affects the market for pickup trucks? Show this
on your diagram. 25,000 18 15
equilibrium c. Suppose that the Department of 30,000 16 16
Transportation imposes costly
price and regulations on manufacturers that 35,000 14 17
quantity of D. THE INCOMES OF E. CONSUMERS EXPECT THE
cause them to reduce supply by one-
third at any given price. Calculate and
40,000 12 18
pizza. plot the new supply schedule and
CONSUMERS RISE, AND PRICE OF PIZZA TO FALL
PIZZA IS AN INFERIOR GOOD. NEXT WEEK.
indicate the new equilibrium price and
quantity on your diagram.

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