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Exercises

Exercises. Chapter 4. Do you know …. the different market situations when there is no shift/change in either demand or supply? what happens in a market when only the demand curve or the supply curve shifts/changes? what happens in a market when both demand and supply curves shift/change?.

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Exercises

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  1. CRC Economics

  2. Exercises Chapter 4 CRC Economics

  3. Do you know … • the different market situations when there is no shift/change in either demand or supply? • what happens in a market when only the demand curve or the supply curve shifts/changes? • what happens in a market when both demand and supply curves shift/change? CRC Economics

  4. 1a. What is this market situation?Replace the ?’s with correct labels. Px ($) S (Supply) ? ? D (Demand) O Qx (units) ? CRC Economics

  5. 1a. What is this market situation? Px ($) The market is at equilibrium. S (Supply) E Pe D (Demand) O Qx (units) Qe CRC Economics

  6. 1b. What is this market situation? Replace the ?’s with correct labels. Px ($) 3. ? S (Supply) E Pe D (Demand) O Qx (units) 2.? Qe 1.? CRC Economics

  7. 1b. What is the market situation? Since Qs > Qd, the market experiences a surplus. Price would fall. Px ($) Surplus (Excess supply) S (Supply) E Pe D (Demand) O Qx (units) Qd Qe Qs CRC Economics

  8. 1c. What is the market situation? Replace the ?’s with correct labels. Px ($) S (Supply) E 3. ? Pe D (Demand) O Qx (units) 2.? Qe 1.? CRC Economics

  9. 1c. What is the market situation? Since Qd > Qs, the market experiences a shortage. Price would rise. Px ($) S (Supply) E Shortage (Excess demand) Pe D (Demand) O Qx (units) Qs Qe Qd CRC Economics

  10. 1d. An exercise What is the equilibrium price, Pe? Equilibrium quantity, Qe? At P = $1, what happens? At P = $3, what happens? Px ($) S (Supply) 4 Surplus 3 E Pe 2 1 D (Demand) Shortage O Qx (units) 1 4 8 CRC Economics Qe

  11. 2a. What happens in a market if only demand shifts/changes? Given a market as shown. What happens if demand increases by 4 units at each price? What happens if demand decreases by 4 units at each price? Px ($) S 4 E’ P’e 3 E Pe 2 D’ E’’ P’’e 1 D’’ D O Qx (units) 1 2 4 6 8 CRC Economics Q’’e Qe Q’e

  12. 2b. What happens in a market if only supply shifts/changes? Given a market as shown. What happens if supply increases by 4 units at each price? What happens if supply decreases by 4 units at each price? S’’ Px ($) S 4 E’’ S’ P’’e 3 E Pe 2 E’ P’e 1 D O Qx (units) 1 2 4 6 8 CRC Economics Q’’e Qe Q’e

  13. 2c. Summary (when only D or S changes/shifts) If D and S then P and Q increases stays the same, increases, increases. decreases stays the same, decreases, decreases. stays the same increases, decreases, increases. stays the same decreases, increases, decreases. CRC Economics

  14. 3a. What happens in the market when both D and S increase? If D and S then P and Q increases stays the same, increases, increases. stays the same increases, decreases, increases. increases increases, is ambiguous, increases. CRC Economics

  15. 3b. What happens in the market when both D and S decrease? If D and S then P and Q decreases stays the same, decreases, decreases. stays the same decreases, increases, decreases. decreases decreases, is ambiguous, decreases. CRC Economics

  16. 3c. What happens in the market when D increases and S decreases? If D and S then P and Q increases stays the same, increases, increases. stays the same decreases, increases, decreases. increases decreases, increases, is ambiguous. CRC Economics

  17. 3d. What happens in the market when D decreases and S increases? If D and S then P and Q decreases stays the same, decreases, decreases. stays the same increases, decreases, increases. decreases increases, decreases, is ambiguous. CRC Economics

  18. 3e. Summary (when both D & S change/shift) If D and S then P and Q increases increases, is ambiguous, increases. decreases decreases, is ambiguous, decreases. increases decreases, increases, is ambiguous. decreases increases, decreases, is ambiguous. The side that changes more will dominate the market. The term “ambiguous” will be replaced by the change dictated by the dominating side. CRC Economics

  19. 3f. An exercise Given a market as shown. 1. What happens if D increases by 4 units and S increases by 2 units? 2. What happens if D increases by 2 units and S increases by 4 units? Px ($) S (Supply) 4 3 E1 E Pe 2 1 E2 D (Demand) O Qx (units) 1 4 8 CRC Economics Qe

  20. 3f. An exercise Given a market as shown. 3. What happens if D decreases by 4 units and S decreases by 2 units? 4. What happens if D decreases by 2 units and S decreases by 4 units? Px ($) S (Supply) 4 3 E4 E Pe 2 1 E3 D (Demand) O Qx (units) 1 4 8 CRC Economics Qe

  21. 3f. An exercise Given a market as shown. 5. What happens if D increases by 4 units and S decreases by 4 units? 6. What happens if D decreases by 2 units and S increases by 2 units? Px ($) E5 S (Supply) 4 3 E Pe 2 1 D (Demand) E6 O Qx (units) 1 4 8 CRC Economics Qe

  22. Now you know … • the different market situations when there is no shift/change in either demand or supply. • what happens in a market when only the demand curve or the supply curve shifts/changes. • what happens in a market when both demand and supply curves shift/change. CRC Economics

  23. See You! Take Care! CRC Economics

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