Economics 201
Lab Practice Problems #3
Demand/Supply/Equilibrium
1. Individual and Market Demand
Suppose that the demand for gizmos is made up of 3 people – Bart, Lisa and Maggie. Their individual demand schedules (quantity per week) are given below:
Bart / Lisa / MaggiePrice($) / Quantity / Price($) / Quantity / Price($) / Quantity
10 / 8 / 10 / 4 / 10 / 9
20 / 6 / 20 / 3 / 20 / 6
30 / 4 / 30 / 2 / 30 / 3
40 / 2 / 40 / 1 / 40 / 0
a) Find the Market Demand.
b) Graph it.
c) What happens to the market demand if Lisa leaves the market? Find and graph the new market demand.
2. Individual and Market Supply
Suppose that 3 people – Moe, Apu and Monty – are willing to produce and sell gizmos. Their individual supply schedules (quantity per week) are given below:
Moe / Apu / MontyPrice($) / Quantity / Price($) / Quantity / Price($) / Quantity
10 / 0 / 10 / 2 / 10 / 3
20 / 5 / 20 / 4 / 20 / 6
30 / 10 / 30 / 6 / 30 / 9
40 / 15 / 40 / 8 / 40 / 12
a) Find the Market Supply.
b) Graph it.
c) What happens to market supply if Moe leaves the market? Find and graph the new market supply.
3. Equilibrium
a) Graph the Market Demand and Supply together (with all six people).
b) What is the equilibrium price and quantity of gizmos?
4. Demand and Supply Analysis
Consider the market for minivans. For the following events, use supply and demand analysis to predict changes in the equilibrium price and quantity of minivans. It may be helpful to use a graph.
a) United Auto Workers of America, the largest union of auto workers, demand and receive higher wages for auto workers
b) A new study released by the Federal Department of Transportation states that minivans are the safest form of auto travel
c) The stock market soars, causing a rise in the general income of consumers
d) There is a technological advance in the production of minivans
e) Consumers expect the price of minivans to fall in the future
f) The price of gasoline falls dramatically
g) Auto makers expect the price of minivans to rise in the future
h) The price of SUV's rises (I can think of 3 different answers to this one)
Consider the market for, what else, beer. For the following events, use supply and demand analysis to predict changes in the equilibrium price and quantity of beer. It may be helpful to use a graph.
a) A new study by the Federal Department of Health states that drinking 2 beers a day is good for overall health
b) The Federal Government lowers the drinking age for beer to 18.
c) A national drought severely decreases to grain harvest (wheat, barley, hops, etc.)
d) The Federal Government raises the drinking age of all alcohol to 25.
e) Beer Workers of America, the largest union of beer workers, lose negotiations with management and are forced to take large pay cuts.
f) The price of pretzels (complement in consumption) rises dramatically.
g) The price of Zima's falls dramatically ( I can think of 3 different answers to this one as well)
5. Name as many demand and supply shifters. Why is price of the good not a shifter?