Download Supply and Demand Worksheet_Foundations

ECO 161: Chapter 2
Supply and Demand Worksheet
1. For each of the following describe how the demand for orange juice will be affected? Be sure to
determine which, if any, of the demand determinants is at work.
a. The New York Times reports that drinking orange juice will lower your risk of cancer, increase you IQ
and increase your sex appeal.
b. The price of apple juice increases.
c. The economy goes into a recession and orange juice is a normal good.
d. Consumers expect the price of orange juice to rise in the future because a hurricane damaged the
orange crop in Florida.
e. The price of orange juice drops.
2. For each of the following describe how the supply of academic textbooks will be affected? Be sure to
determine which, if any, of the supply determinants is at work.
a. Publishers have developed a more efficient way of mass-producing textbooks.
b. The price of paper has increased.
c. A boom in the market for self-help books has increased the price consumers are willing to pay for
self-help books.
d. Several publishing companies have failed and have left the industry.
e. The government provides a $5 subsidy to every new textbook purchased.
3. Suppose the market for MP3 players is in equilibrium. How will each of the following changes in
demand and/or supply affect equilibrium price and equilibrium quantity in this market? Use supply and
demand diagrams to verify your answers.
a. Supply decreases and demand is constant.
b. Supply increases and demand is constant.
c. Demand increases and supply is constant.
d. Demand decreases and supply is constant.
e. Demand and supply both increase.
f. Demand and supply both decrease.
g. Demand increases and supply decreases.
h. Demand decreases and supply increases.
4. More Advanced.
Suppose the supply of a good is given by the equation: P = 4 + Qs
Demand for this good is given by the equation: P = 24 – 4Qd
Graph both of these functions. Use algebra to solve for equilibrium price and quantity.
Now there is a shift in the demand curve and the new demand curve is given by: P = 34 – 4Qd.
Add this demand curve to your graph and solve for the new equilibrium price and quantity.