Download Name: Practice Problems Directions: For each of the scenarios on

Name:
Practice Problems
Directions: For each of the scenarios on the next page, answer the question and then
mark which graph illustrates it.
1) How did the heavy rains in South America in 1997 affect the market
for coffee?
__________ Explanation:
2) The Surgeon General decides french fries are not bad for your health
after all and issues a report endorsing their use. What happens to the
market for french fries?
__________ Explanation:
3) How do you think rising incomes affect the market for ski vacations?
__________ Explanation:
4) A new technique is discovered for manufacturing computers that
greatly lowers their production cost. What happens to the market for
computers?
__________ Explanation:
5) How would a ban on smoking in public affect the market for
cigarettes?
__________ Explanation:
Problems 6–10 are based on the graph below.
6. At a price of $1.50 per dozen, how many bagels are demanded per month?
7. At a price of $1.50 per dozen, how many bagels are supplied per month?
8. At a price of $3.00 per dozen, how many bagels are demanded per month?
9. At a price of $3.00 per dozen, how many bagels are supplied per month?
10. What is the equilibrium price of bagels? What is the equilibrium quantity per
month?
Problems 11–12 are based on the model of demand and supply for coffee in millions
of pounds.
Price
Quantity demanded
Quantity supplied
$3
4
5
6
7
8
9
40
35
30
25
20
15
10
10
15
20
25
30
35
40
11. Suppose the quantity demanded rises by 20 million pounds of coffee per month
at each price. Draw the initial demand and supply curves based on the values given
in the table above. Then draw the new demand curve given by this change, and show
the new equilibrium price and quantity.
12. Suppose the quantity supplied rises by 20 million pounds per month at each
price, while the quantities demanded retain the values shown in the table above.
Draw the new supply curve and show the new equilibrium price and quantity.
Problems 13–14 are based on the demand and supply schedules for gasoline below
(all quantities are in thousands of gallons per week):
Price per gallon
Quantity demanded
Quantity supplied
$1
2
3
4
5
6
7
8
8
7
6
5
4
3
2
1
0
1
2
3
4
5
6
7
13. Graph the demand and supply curves; show the equilibrium price and quantity.
14. At a price of $3 per gallon, would there be a surplus or shortage of gasoline?
How much would the surplus or shortage be? Indicate the surplus or shortage on
the graph.