Supply & Demand ReviewUnit 2

Warm Up: 3/13/13List the determinants of demand.

List the determinants of supply.

Question 1

Give an example of a good with perfectly inelastic supply. Draw a supply graph for it.

Question 2

Give an example of a good with elastic demand. Draw a demand graph for it.

Question 3

Give an example of a good with elastic supply. Draw a supply graph for it.

Question 4

Give an example of a good with inelastic demand. Draw a demand graph for it.

Question 5

Draw a properly labeled supply and demand graph. Label equilibrium price and equilibrium quantity.

Question 6

Draw an effective price floor on a supply and demand graph. Label any shortages or surpluses that might exist.

Question 6

Price

Quantity

D

S

Peq

Qeq

Price Floor

Qd Qs

Question 7

Draw an effective price ceiling on a supply and demand graph. Label any shortages or surpluses that might exist.

Question 7

Price Ceiling

Price

Quantity

D

S

Peq

Qeq QdQs

Question 8

Draw a supply and demand graph that would have a shortage. Write how the shortage could be eliminated.

The shortage could be eliminated by raising the price to Peq.

P

Price

Quantity

D

S

Peq

Qeq QdQs

Question 8

Question 9

Draw a supply and demand graph that would have a surplus. Write how the suprlus could be eliminated.

Question 9

Price

Quantity

D

S

Peq

Qeq

P

Qd Qs

The surplus could be eliminated by lowering the price to Peq.

Question 10TV shows like Cake Boss and Ace of Cakes have inspired more people to open up bakeries. (Cake) Draw a properly labeled supply and demand graph for this scenario.

Question 10

Price

Quantity

D1

S1

Peq1

Qeq1

Peq2

S2

Qeq2

Supply Increases:# of sellers

Peq decreases

Qeq increases

Question 11More people have jobs. A tax has been placed on video game companies. (Video games) Draw a properly labeled supply and demand graph for this scenario.

Question 11Demand increases:Income

Decrease in Supply:Government

Peq increases

Qeq: indeterminant

Price

Quantity

D1

S

Peq1

Qeq

D2

Peq2

S2

Question 12People now more interested in smart phones than flip phones. A shipment of iPhones have been lost at sea. Draw a properly labeled supply and demand graph for this scenario.

Question 12Demand increases:Tastes & Pref.

Decrease in Supply:Weather/Natural Disasters

Peq increases

Qeq: indeterminant

Price

Quantity

D1

S

Peq1

Qeq

D2

Peq2

S2

Question 13

A price ceiling has been placed on Lakers tickets at the Staples Center. Draw a properly labeled supply and demand graph for this scenario.

Question 13

Price

Quantity

S

D

Peq1

Qeq1

P

Qd

Results in a shortage

Question 14The cost of denim to make jeans has increased. (Jeans) The price of jeans does not change to match the new equilibrium price. Draw a properly labeled supply and demand graph for this scenario.

Question 14

QDQS

• Decrease in Supply:Cost of Inputs

• Price doesn’t change to match equilibrium - causes a shortage

Price

Quantity

D1

S

P

S2

Question 15Pharmaceutical companies have invested in better technology to produce life-saving medicine more efficiently. (life-saving medicine) Draw a properly labeled supply and demand graph for this scenario.

Question 15

Price

Quantity

D

S1S2

Peq1

Qeq1

Peq2

Qeq2

• Increase in supply:Technology

• Peq decreases

• Qeq increases minimally

Question 16

What is the Law of Demand?

Question 16Inverse relationship between price & quantity demanded

P Qd P Qd

Question 17

What is the Law of Supply?

Question 17

P Qs

P Qs

Direct relationship between price & quantity supplied

Question 18

What is the definition of demand?

Draw a demand graph.

Question 18The quantity of goods a consumer is willing and able to purchase at various prices

Price

Quantity

D

Question 19

What is the definition of supply?

Draw a supply graph.

Question 19

Price

Quantity

SThe quantity of goods a BUSINESS is willing and able to SELL at various prices.

Three W’sOn your warm up sheet, write the following:

1) What: What did you learn?2) So What: What is the relevance of this subject to your life?3) Now What: What will you do with this information?