Supply and Demand Assignment
⢠Visit http://www.bized.co.uk/learn/economics/markets/mechanism/interactive/part1.htm and read the material posted about supply and demand. Explore the concepts of supply and demand by using the interactive features on the graphs. Use the questions following the diagrams to guide your exploration. Visit parts 1, 2, & 3 of the Web site.
⢠Fill in the matrix and answer the questions in Appendix C. Describe how changes in price and/or quantity of various goods and services will affect either supply or demand and the equilibrium price. Use the graphs from the interactive activity as a tool to help you visualize the changes in price and quantity.
If the price of a good increases, what happens to demand?
The demand would decrease. The amount of decrease would be determined by the price elasticity of demand of the good.
If the price of a good decreases, what happens to supply?
The supply would drop because consumers would take advantage of the savings.
price of market balance
The illustration that accompanied Marshall's origi...
Perfectly inelastic demandDoes a change in price create curve shifts? Explain.
Yes, it is possible for price change to create curve shifts-for instance: a demand curve would result when a price increase in a good or service would cause a decrease in the quantity demand of that good or service where as a price decrease in a good or service would cause an increase in the quantity demand of that good or service. A supply curve would result when a price increase in a good or service causes an increase in quantity supply whereas a price decrease would in a good or service causes a decrease in quantity supply.
Event | Market affected by event | Shift in supply, demand, or both. Explain your answer. | Change in equilibrium |
Frozen orange crops in California | Orange juice | Supply (left)-Not as many available oranges to offer consumers. | Price will increase and quantity will decrease. |
Hurricanes in the Gulf Coast | Gulf Coast tourism | Supply (left) - not as many tourist areas available to offer tourists due to property losses. | Price will be increase-quantity will decrease. |
Price of hot dogs increases | Hamburger | Supply (left)-Demand (right)-hamburger is a substitute for hotdogs-hamburger demand will rise. | Price will stay the same-Demand will increase-quantity will decrease. |
Price of sugar increases | Candy | Demand (left)-candy will be more expensive to produce. | Price will increase-quantity will decrease. |
New auto company opens in Detroit | Automobile | Supply (right)-more automobiles will be available. | Quantity will increase-Price will decrease. |
War in Middle East | Gasoline | Supply (left)-not as much gasoline available. | Quantity will decrease-Price will increase. |
Movie theaters increase admission prices | Video rentals | Supply (left)-Demand (right)-video rental is a substitute for theaters-rental demand will rise. | Price will stay the same-Demand will increase-quantity will decrease. |
Very trendy designer handbag manufacturer enters the market | Hand bags | Supply (right)-more handbags will be available. | Quantity will increase-Price will decrease. |
Cost of cotton decreases | Textiles | Demand (right)-textiles will be less expensive to produce. | Quantity will increase-Price will decrease. |
Tennis racquets decrease in price | Tennis balls | Demand (right)-Supply (left)-tennis balls will be in higher demand. | Price will remain the same-Demand will increase-quantity will decrease. |
Technology improves efficiency in pasta manufacturing | Pasta | Supply (right)-more pasta will be available for purchase. | Quantity will increase-Price will decrease. |
References
Mankiw, N. G. (2004). Principles of economics (3rd ed.). Chicago, IL: Thomson South-Western.
The Market System - Part 1 (2008). Biz/ed. Retrieved January 24, 2008, from http://www.bized.co.uk/learn/economics/markets/mechanism/interactive/part1.htm