Assignment: Equilibrium Prices and Equilibrium Quantities
Below is a table showing the demand for Frisbees and the supply of Frisbees. Using one of the three tools from the previous assignments, plot the demand curve and supply curve. Label the demand curve "D" and the supply curve "S." Then answer the questions that follow.
Demand for and Supply of Frisbees
|
Price ($ per Frisbee)
|
Quantity Demanded (millions of Frisbees)
|
Quantity Supplied (millions of Frisbees)
|
|
$1.00
|
300
|
100
|
|
$2.00
|
250
|
150
|
|
$3.00
|
200
|
200
|
|
$4.00
|
150
|
250
|
|
$5.00
|
100
|
300
|
Answer the questions below based on your Supply and Demand Graph.
1. Under these conditions, what would the equilibrium price be?
2. What is the equilibrium quantity of Frisbees?
3. If the price currently prevailing on the market is $4.00 per Frisbee, how many would buyers want to buy?
4. If the price currently prevailing on the market is $4.00 per Frisbee, how many Frisbees would sellers want to sell?
5. Under these conditions, would there be a shortage or surplus of Frisbees?
6. If the price currently prevailing on the market is $2.00 per Frisbee, how many would buyers want tobuy?
7. If the price currently prevailing on the market is $2.00 per Frisbee, how many would sellers want tosell?
8. Under these conditions, would there be a shortage or surplus of Frisbees?
Now suppose that an increase in the cost of plastic used to make Frisbees causes the supply curve to changeas follows:
Change in Supply of Frisbees
|
Price ($ per Frisbee)
|
Quantity Supplied (millions of Frisbees)
|
|
$2.00
|
50
|
|
$3.00
|
100
|
|
$4.00
|
150
|
|
$5.00
|
200
|
Plot the new supply schedule (on your same graph) and label it S1. Label the new equilibrium E1.
9. Under these conditions, what would be the equilibrium price?
10. What would be the equilibrium quantity?
Delete the incorrect answer in the boldfaced pairs of words below to make the paragraph correct.
Compared totheequilibrium price in the first section, we say that, because of this change in (price/underlying conditions), the (supply/quantity supplied)changed, and both the equilibrium price and the equilibrium quantity changed. The equilibrium price (increased/decreased)and the equilibrium quantity(increased/decreased).
Now with the supply schedule at S1, suppose further that a sharp drop in people's incomes as the result of a nation- wide recession causes the demand schedule to change to thefollowing:
Change in Demand for Frisbees
|
Price ($ per Frisbee)
|
Quantity Demanded (millions of Frisbees)
|
|
$1.00
|
200
|
|
$2.00
|
150
|
|
$3.00
|
100
|
|
$4.00
|
50
|
Plot the new demand schedule (on the same graph) and label it D1. Label the new equilibrium E2.
11. Under these conditions, what would be the equilibrium price?
12. What would be the equilibrium quantity?
Delete the incorrect answer in the boldfaced pairs of words below to make the paragraph correct.
Compared to the equilibrium price in question F, because of this change in (price/underlying conditions), the (demand/quantity demanded)changed. The equilibrium price (increased/decreased)and the equilibrium quantity (increased/decreased).