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Economic Survey
Mr. Rubin de Celis
Supply and Demand problems – Chapter 6
Question 1: If the demand and supply curve for computers are:
D = 100 - 6P, S = 28 + 3P
where P is the price of computers, what is the quantity of computers bought and sold at equilibrium.
Question 2: The quantity demanded of Good Z depends upon the price of Z (Pz), monthly income (Y), and
the price of a related Good W (Pw). Demand for Good Z (Qz) is given by equation 1 below: Qz = 150 - 8Pz
+ 2Y - 15Pw
Find the demand equation for Good Z in terms of the price for Z (Pz), when Y is $50 and Pw = $6.
Hint: This is a simple substitution question. Substitute those two values into our demand equation:
Question 3: Beef supplies are sharply reduced because of drought in the beef-raising
states, and consumers turn to pork as a substitute for beef. How would you illustrate this
change in the beef-market in supply-and-demand terms?
Question 4: In December, the price of Christmas trees rises and the quantity of trees sold
rises. Is this a violation of the law of demand?
Question 5: A firm charges $800 for its unique word processor. If total revenue is
$56,000 in July, how many word processors were sold that month?
.
Question 6: Find the slope of an assumed linear demand curve for theater tickets, when
persons purchase 1,000 at $5.00 per ticket and 200 at $15.00 per ticket.
Question 7: Given the following data:
WIDGETS P = 80 - Q (Demand)
P = 20 + 2Q (Supply)
Given the above demand and supply equations for widgets, find the equilibrium price and
quantity.
Question 8: Given the following data:
WIDGETS P = 80 - Q (Demand)
P = 20 + 2Q (Supply)
Now suppliers must pay a tax of $6 per unit. Find the new equilibrium price-inclusive
price and quantity.
Hint: Now suppliers do not get the full price when they make a sale - they get $6 less.
This changes our supply curve to: P - 6 = 20 + 2Q (Supply)
P = 26 + 2Q (Supply)
To find the equilibrium price, set the demand and supply equations equal to each other:
Question 9: Given the following data:
WIDGETS P = 80 - Q (Demand)
P = 20 + 2Q (Supply)
We saw in the last question the equilibrium quantity will now be 18 (instead of 20) and
the equilibrium price is now 62 (instead of 20). Which of the following statements is true:
(a) Tax revenue will equal $108
(b) Price increases by $4
(c) Quantity decreases by 4 units
(d) Consumers pay $70
(e) Producers pay $36
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Question 10: Which of the following factors will cause the demand curve for labor to
shift to the right?
(a) the demand for the product by labor declines.
(b) the prices of substitute inputs falls.
(c) the productivity of labor increases.
(d) the wage rate declines.
(e) None of the above.
Question 11 –
This question goes over a common supply and demand shifters in a coffee market
context, and how each of the following events will affect market for coffee:
a) a blight on coffee plants kills off much of the Brazilian crop
b) coffee workers organize themselves into a union and gain higher wages
c) coffee is shown to cause cancer in laboratory rats
d)price of tea declines
e) Coffee prices are expected to rise rapidly in the near future
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1
The Supply Curve is upward-sloping because:
As the price increases, so do costs.
As the price increases, consumers demand less.
As the price increases, suppliers can earn higher levels of profit or justify higher marginal
costs to produce more.
None of the Above
2
Part of the reason that Michael Jordan earns millions of dollars each year while school teachers
may earn $30,000 is because
The supply of superstar basketball players is very low, while the supply of competent
teachers is much larger.
Demand for Michael Jordan's talents is very high since he can generate so much revenue for a
firm.
Consumers enjoy basketball to the point that they are willing to spend lots of money and time
attending games and watching commercials.
All of the Above
3
When college students leave town for the summer, the demand for meals at the local restaurants
declines. This results in
a decrease in equilibrium price and an increase in quantity.
an increase in equilibrium price and quantity.
a decrease in equilibrium price and quantity.
an increase in equilibrium price, and a decrease in quantity.
4
None of the Above
All the following shift the demand curve for automobiles to the right except:
the local factory gives a big raise to its employees.
a brand new automobile dealership opens in town.
the price of gasoline falls.
5
None of the Above
If the cost of computer components falls, then
the demand curve for computers shifts to the right.
the demand curve for computers shifts to the left.
the supply curve for computers shifts to the right
the supply curve for computers shifts to the left
6
What happens in the market for airline travel when the price of traveling by rail decreases?
The demand curve shifts left.
The demand curve shifts right.
The supply curve shifts left.
The supply curve shifts right.
8
We move along the supply curve.
If a sin tax is placed on sales of alcohol,
the demand curve shifts to the left.
the demand curve shifts to the right.
the supply curve shifts to the left.
9
the supply curve shifts to the right.
When a price ceiling is imposed above the equilibrium price,
a shortage results.
a surplus results.
the equilibrium outcome prevails.
10
there is not enough information to determine the outcome.
If the demand curve shifts to the right, then we move up and to the right along our supply curve.
True
11
right.
False
If the cost of making bicycles falls, the price goes down, causing the demand curve to shift to the
True
False