Question

**Section 2: Supply and Demand Model and
PPF**

This section deals with the Production Possibility Frontier and
market forces of supply and demand models, as well as, the impacts
of government policies on the interactions of supply and demand in
the market economy.

1. Given the table below, graph the demand and supply curves for flashlights. Make certain to label the equilibrium price and equilibrium quantity.

Price |
Quantity Demanded Per Month |
Quantity Supplied Per Month |

$5 |
6,000 |
10,000 |

$4 |
8,000 |
8,000 |

$3 |
10,000 |
6,000 |

$2 |
12,000 |
4,000 |

$1 |
14,000 |
2,000 |

a. What are the equilibrium price and the equilibrium quantity?

b. Suppose the price is currently $5. Explain what problem would exist in the market and calculate the size of that problem. What would you expect to happen to price?

c. Suppose the price is currently $2. Explain what problem would exist in the market and calculate the size of the problem. What would you expect to happen to price?

Answer #1

**1.Ans:** The following figure shows the demand
and supply curves for flashlights.

**a) Ans:** The equilibrium price is
**$4** and the equilibrium quantity is
**8,000**

Explanation:

At equilibrium price , Qd = Qs

**b) Ans:**

At price $5 , there is surplus in the market becuase Qs is greater than Qd.

Surlus quantity = 10,000 - 6,000 = 4,000

When Qs > Qd , then there will be a downward pressure on price. It means price will decrease.

**c) Ans:**

At price $2 , there is shortage in the market becuase Qd is greater than Qs.

Shortage quantity = 12,000 - 4,000 = 8,000

When Qd > Qs , then there will be an upward pressure on price. It means price will increase.

Price
Quantity Demanded/Month
Quantity Supplied/Month
$5
6,000
10,000
$4
8,000
8,000
$3
10,000
6,000
$2
12,000
4,000
$1
14,000
2,000
A. Graph the demand and supply curves.
B.. What is the equilibrium price and equilibrium quantity?
C. Suppose the price is currently at $5. What problem would
exist in the economy? What would you expect to happen to price?
D. Suppose the price is currently $2. What problem exists in the
economy? What would you expect to happen to price?

The table below presents the demand and supply for coffee at
coffee shops across the Carleton University campus.
Price
Quantity Demanded/Week
Quantity Supplied/Week
$5
6,000
10,000
$4
8,000
8,000
$3
10,000
6,000
$2
12,000
4,000
$1
14,000
2,000
a. What is the equilibrium price and equilibrium quantity?
b. Suppose in an effort to keep coffee affordable for students, the
University's administration requires the price of coffee to be set
at $2 at the start of the academic year. What imbalance...

Question 5
Knowing that coffee and tea are substitutes, suppose that the
demand for coffee increases and, at the same time, the supply of
the coffee decreases. What would surely happen in the tea
market?
Question 5 options:
The Demand for tea will go up because the price of coffee went
up.
The price of tea will go down because the price of coffee went
up.
The supply of tea will go down because the price of coffee went
up....

Suppose there is an increase in both supply and demand for
personal computers. In the market for personal computers, we would
expect the
a. the change in the equilibrium quantity to be ambiguous and
the equilibrium price to rise
b. equilibrium quantity to rise and the equilibrium price to
fall.
c. equilibrium quantity to rise and the equilibrium price to
rise
d. equilibrium quantity to rise and the change in the
equilibrium price to be ambiguous

Consider the following supply and demand curves for tickets to
Oakland A’s games, where Q is measured in hundreds of tickets per
game.
Qd =100–2P Qs =20+3P
1. What would happen if bay area residents increase their
preferences for A’s games? Illustrate the effect on the market
graphically, and discuss how you would expect equilibrium quantity
and price to change.
2. What would happen if the price for San Francisco Giants
tickets increased? Illustrate graphically, and discuss how you
would...

Problems 2–3 are based on the model of demand and supply for
coffee as shown in Figure 3.10 "Changes in Demand and Supply". You
can graph the initial demand and supply curves by using the
following values, with all quantities in millions of pounds of
coffee per month: (1 Point each)
Price Quantity demanded Quantity
supplied
$3
40
10
4
35
15
5
30
20
6
25
25
7
20
30
8
15
35
9
10
40
Suppose the quantity...

Assume the following demand and supply equations (price in $,
quantity in 000 units):
Demand: Qd = 240 - 17.5P
Supply: Qs = 100 + 8P
What is the equilibrium price? What is the equilibrium
quantity?
Suppose, a seller decides to sell the product at $4 per unit.
What will happen?

Starting from a point of market equilibrium, suppose the demand
curve shifts left and the supply curve shifts right. What will be
true of the new equilibrium quantity relative to the starting
point?
Select all that apply:
the equilibrium price will be lower
the equilibrium price will be higher
the equilibrium quantity will be lower
we cannot be sure how equilibrium quantity will change
2)Suppose that stock market investors expect a booming economy
and a higher overall price for stocks...

Suppose the market for corn is given by the following equations
for supply and demand:
QS = 2p − 2
QD = 13 − p
where Q is the quantity in millions of bushels per year and p is
the price.
Calculate the equilibrium price and quantity.
Sketch the supply and demand curves on a graph indicating the
equilibrium quantity and price.
Calculate the price-elasticity of demand and supply at the
equilibrium price/quantity.
The government judges the market...

Draw a supply and demand diagram showing the market equilibrium
price and quantity.
Now draw a diagram showing how a perfectly competitive firm
might make a loss at this market price.
Identify the firm’s quantity supplied, average total cost, and
total losses.
Finally, use the market supply and demand diagram to show what
would happen to bring this market to long run competitive
equilibrium.

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