Using Supply and Demand

Now let's put it all together. We can use our supply and demand model to understand why prices change. It all begins with the non-price determinates of demand (Pe, Pog, I, Npot, T) and the non-price dterminates of supply (

Use supply and demand curves to illustrate how each of the following changes will affect the price and quantity of the stated product, ceterus paribus.

Before you guess, answer the following questions:
(1) Which determinate has changed?
(2) Will it affect supply or demand?
(3) Will supply or demand increase or decrease?
(4) GRAPH IT! What happens to price and quantity?

1. Computers Consumer incomes increase

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

2. Calculators Improved technology reduces the costs of production

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

3. Sony Play Station Computer prices drop

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity? (or maybe)

4. Nikon Cameras Price of film developing decreases

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

5. Cigarettes Reduced gov't farm subsidies increase the costs of production

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

6. Coffee a report links coffee drinking to heart attacks

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

7. Wood furniture Lumber prices rise

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

8. Steel Furniture Wood furniture prices increase

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

9. Computers 5 new firms enter the industry

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

10. Cigarettes Gov't announces a large tax increase will begin in 1 week

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

11. Gasoline Gasoline taxes increase

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

12. Soybeans The price of corn rises

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

BACK

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

(1) Which determinate has changed? (2) Will it affect supply or demand? (3) Will supply or demand increase or decrease? (4) GRAPH IT! What happens to price and quantity?

"Real" Examples

• QUIZ
• http://cnn.com/US/9907/27/gas.prices/
• http://cnnfn.com/2000/02/07/companies/wires/gasprices_wg/
• http://cnnfn.com/2000/01/21/companies/airfuel/
• http://cnn.com/US/9908/09/rv.boom/
• [Determin] or [determinsm]

   

ANSWERS

Market Supply: correct answer "B" [RETURN]