Demand and Supply Schedule for Rap Music CDs
|
Price
|
Quantity Demanded
|
Quantity Supplied
|
|
10
|
70 million
|
20 million
|
|
11
|
65 million
|
40 million
|
|
12
|
60 million
|
60 million
|
|
13
|
55 million
|
80 million
|
|
14
|
50 million
|
100 million
|
1) Using the given supply and demand schedule above, graph the supply and demand curves for rap music CDs.
2) What are the equilibrium price and quantity? In other words, where is Qd = Qs? What is the quantity that matches in both columns and what is the price at that point?
Equilibrium quantity, where quantity demanded is equal to quantity supplied, is ________ million.
Equilibrium price, that price at which Qd = Qs, is ____________
3) At a price of $13, is there is shortage or surplus? How much is the shortage or surplus?
In other words, what is the quantity demanded at a price of $13?
What is the quantity supplied at a price of $13?
Which is larger at a price of $13, quantity demanded or quantity supplied?
By how many millions of units is one bigger than the other?
If quantity demanded is larger, there is a shortage. If quantity supplied is larger, there is a surplus. Which do we have here, a shortage or a surplus?
4) Show graphically what happens to the market for rap music CDs if the price of CD players increases. What are the new equilibrium price and quantity?
Suppose that the price of CD players increases. CDs and CD players are goods typically consumed together, so they are called _________.
If the price of CD players increases, people will buy fewer CD players. That’s the Law of Demand. However, they will also change their entire demand for rap music CDs as well. Since they’ll be buying fewer CD players, will they need more or fewer CDs to play on the CD players they’re not buying?
Let’s suppose that the new demand schedule looks like this:
What is the new equilibrium? The new equilibrium quantity, where Qd = Qs, is ______ and the new equilibrium price, the price at which Qd = Qs, is $_________
Plot the new demand curve with the old one. Is the new one to the left or the right of the old one? ___________ (left or right?)
If the new demand curve is on the right side of the old one, then demand has increased. If the new demand curve is on the left side of the old one, then demand has decreased. Which is it? Did demand for rap music CDs increase or decrease? ___________
Finally, how did the equilibrium price and quantity change in direction? Did they increase or decrease? Equilibrium price of rap music CDs _______ (increased or decreased?) after the price of the CD players increased. Equilibrium quantity of rap music CDs _______ (increased or decreased?) after the price of the CD players increased.