Download Name Economics 202 Worksheet 2 Finding the Equilibrium Prices

Name
Economics 202
Worksheet 2
Finding the Equilibrium Prices and Quantity
1. Given the following observations:
Price/Cartons of Coke
6
5
4
3
2
1
Quantity Demanded
(Millions of Cartons)
1
3
5
7
9
11
Quantity Supplied
(Millions of Cartons)
11
8
5
2
0
0
Label the vertical axis as the price per unit of Coke and the horizontal axis as the quantity
of the Coke per month. Draw the demand curve and label it D. Draw the supply curve
and label it S. Label the price where the quantity demanded equals the quantity supplied
as P* and the corresponding quantity as Q*. What does this point mean?
2. Choose a price above the equilibrium price and label it P1. Is there a surplus or
shortage? What is its size?
3. Choose a price below the equilibrium price and label it P2. Is there a surplus or
shortage? What is its size?
4. Note that in a price system without government interference the condition of surplus or
shortage drawn above is only temporary. After a trial-and-error period of time the forces
of surplus and shortage will automatically restore the equilibrium price and quantity as
originally drawn in step one. Explain how this occurs.
COMPLETION QUESTIONS
1.
The
states that there is an inverse relationship between
the price and quantity demanded, ceteris paribus.
2.
A movement along a demand curve caused by a change in its price is called a
.
3.
A
income increases.
4.
states that there is a direct relationship between the
price and the quantity supplied, ceteris paribus.
5.
A movement along a supply curve resulting from a change in price is called a
.
6.
When the price of a good is greater than the equilibrium price, there is an excess
.
7.
The unique price and quantity established at the intersection of the supply and
demand curves is called
.
8.
The
is the supply and demand institution which
establishes equilibrium through the ability of prices to rise and fall.
9.
A (an)
is one where there is an inverse relationship
between changes in income and its demand curve.
10.
A (an)
is one that competes with another good for
consumer purchases. As a result, there is a direct relationship between a price
change for one good and the demand for its “competitor” good.
11.
the
The principle stating there is a direct relationship between the price of a good and
quantity sellers are willing to offer for sale in a given time period, ceteris
paribus, is the
.
12.
A (an)
is any arrangement in which buyers and sellers
interact to determine the price and quantity of goods and services exchanged.
is one that consumers buy more of when their