Answer: A shortage occurs when the price is below the equilibrium price. When the price
is less than the equilibrium price, the quantity demanded is greater than the quantity
supplied.
Topic: Shortage
Skill: Level 2: Using deinitions
Section: Checkpoint 4.3
Status: Old
AACSB: Relective thinking
2) When does a surplus occur?
Skill: Level 2: Using deinitions
Section: Checkpoint 4.3
Status: Old
AACSB: Relective thinking
3) At prices above the equilibrium price, what occurs?
Skill: Level 2: Using deinitions
Section: Checkpoint 4.3
Status: Old
AACSB: Written and oral communication
4) When the demand for blue jeans increases, what happens next?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Written and oral communication
120
5) Suppose Ramen noodles, an inexpensive but a quite tasty dish, are an inferior good. Why
do grocery stores in college towns, that is, towns with a large fraction of college students,
stock a lot of Ramen noodles?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Written and oral communication
6) Why does an increase in supply lead to lower prices?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Written and oral communication
7) Smart phones are becoming less expensive as new technology reduces the cost of
production. In a supply and demand model, explain the efects of the technological
innovations and their efect on the quantity of smart phones.
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Written and oral communication
121
8) What is the efect on the price and quantity of a product if both the demand and supply
simultaneously increase?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
9) What is the efect on the price and quantity of a product if the demand decreases and
the supply simultaneously increases?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
10) For consumers, computers are a complement to computer software. Suppose the price
of a computer falls. Simultaneously, suppose that the number of companies selling
computer software decreases. How do these changes afect the price and quantity of
computer software?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
122
11) In early 2012 the price of computer hard disc drives rose. In a demand and supply
model, shifts in what curve or curves could have brought about the higher price?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
12) The above table gives the demand and supply schedules for cat food. If the price is
$3.00 per pound of cat food, will there be a shortage, a surplus, or is this price the
equilibrium price? If there is a shortage, how much is the shortage? If there is a surplus,
how much is the surplus? If $3.00 is the equilibrium price, what is the equilibrium
quantity?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
13) The above table gives the demand and supply schedules for cat food. If the price is
$1.00 per pound of cat food, will there be a shortage, a surplus, or is this price the
equilibrium price? If there is a shortage, how much is the shortage? If there is a surplus,
how much is the surplus? If $3.00 is the equilibrium price, what is the equilibrium
quantity?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
123
14) The above table gives the demand and supply schedules for cat food. What is the
equilibrium price and quantity?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
15) The above table gives the demand and supply schedules for cat food. If the supply
increases by 20 tons at every price, what is the new equilibrium price and quantity?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
124
16) The diagram above illustrates the market for apartments in Victoria, British Columbia.
a. If the current rent is $300 per month, is there a shortage or surplus in the apartment
market and how much is the shortage or surplus?
b. What is the equilibrium rent and quantity of apartments?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
125
17) In the igure above, if the price is $8 a unit, is there a shortage or surplus and what is
the amount of any shortage or surplus?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
18) In the igure above, what is the equilibrium price and quantity?
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
126
19) Last year a very severe ice storm hit the north counties of New York state, and the
states of Vermont and Maine. Electric poles were down and no one had power for days. It
was reported that the price of kerosene heaters skyrocketed and the number purchased
increased during this time. Using a supply and demand diagram, show the impact of the ice
storm on the market for kerosene heaters.
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
127
20) Consumers can use either natural gas or heating oil to warm their houses. Suppose the
price of natural gas increases. Use a demand and supply diagram to show the impact of the
higher price of natural gas on the market for home heating oil.
Skill: Level 3: Using models
Section: Checkpoint 4.3
Status: Old
AACSB: Analytical thinking
128