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9) Soft drinks are a normal good. Draw a graph showing the effect of an increase in income on
the demand for soft drinks.
4.6 Essay: Supply
1) What leads to a decrease in the quantity supplied of a good or service?
2) What is the difference between quantity supplied and supply?
3) List the factors that change supply and shift the supply curve. Tell what happens to supply and
the supply curve when there is an increase in the factor.
4) What are substitutes in production?
5) Suppose that the number of companies selling computer software decreases. How does this
change affect the supply of computer software and the supply curve of computer software?
6) Suppose that the productivity used to produce computers advances. How does this change
affect the supply of computers and the supply curve of computers?
7) The table above represents a possible supply schedule for a paper company. The law of supply
is valid for every price from ________ to ________.
8) The table above indicates how many thousands of containers of ice cream three different
companies are willing to produce at different prices. Does this information reflect the law of
supply? Why or why not?
9) The table above shows supply schedules for the two nail salons in town, Nancy's Nails and
Fancy Nails. What is the market supply of manicures?
4.7 Essay: Market Equilibrium
1) When does a shortage occur?
2) When does a surplus occur?
3) At prices above the equilibrium price, what occurs?
4) When the demand for blue jeans increases, what happens next?
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?
6) Why does an increase in supply lead to lower prices?
7) Personal computers are becoming less expensive as new technology reduces the cost of
production. In a supply and demand model, explain the effects of the technological innovations
and their effect on the quantity of computers.
8) What is the effect on the price and quantity of a product if both the demand and supply
simultaneously increase?
9) What is the effect on the price and quantity of a product if the demand decreases and the
supply simultaneously increases?
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 affect the price and quantity of computer software?
11) In early 2009 the price of computer memory chips rose. In a demand and supply model,
shifts in what curve or curves could have brought about the higher price?
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?
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?
14) The above table gives the demand and supply schedules for cat food. What is the equilibrium
price and quantity?
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?
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?
17) In the figure above, if the price is $8 a unit, is there a shortage or surplus and what is the
amount of any shortage or surplus?
18) In the figure above, what is the equilibrium price and quantity?
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.
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.
