Chapter 4/The Market Forces of Supply and Demand ❖ 67
SOLUTIONS TO TEXT PROBLEMS:
Quick Quizzes
1. A market is a group of buyers (who determine demand) and a group of sellers (who
2. Here is an example of a monthly demand schedule for pizza:
Price of Pizza Slice
Number of Pizza Slices Demanded
$ 0.00
10
0.25
9
The demand curve is graphed in Figure 1.
68 ❖ Chapter 4/The Market Forces of Supply and Demand
3. Here is an example of a monthly supply schedule for pizza:
Price of Pizza Slice
Number of Pizza
Slices Supplied
$ 0.00
0
0.25
100
The supply curve is graphed in Figure 2.
4. If the price of tomatoes rises, the supply curve for pizza shifts to the left because there has
been an increase in the price of an input into pizza production, but there is no shift in
0.50
200
0.75
300
1.00
400
1.25
500
1.50
600
1.75
700
2.00
800
2.25
900
2.50
Chapter 4/The Market Forces of Supply and Demand ❖ 69
Questions for Review
1. A competitive market is a market in which there are many buyers and many sellers of an
2. The demand schedule is a table that shows the relationship between the price of a good and
3. A change in consumers’ tastes leads to a shift of the demand curve. If the change in
consumers’ tastes leads to an increase in demand, consumers want to buy more of this good
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5. A supply schedule is a table showing the relationship between the price of a good and the
quantity a producer is willing and able to supply. The supply curve is the upward–sloping line
7. The equilibrium of a market is the point at which the quantity demanded is equal to quantity
supplied. If the price is above the equilibrium price, sellers want to sell more than buyers
8. When the price of beer rises, the demand for pizza declines, because beer and pizza are
complements and people want to buy less beer. When we say the demand for pizza declines,
9. Prices play a vital role in market economies because they bring markets into equilibrium. If
the price is different from its equilibrium level, quantity supplied and quantity demanded are
Chapter 4/The Market Forces of Supply and Demand ❖ 71
Quick Check Multiple Choice
Problems and Applications
1. a. Cold weather damages the orange crop, reducing the supply of oranges and raising the
price of oranges. This leads to a decline in the supply of orange juice because oranges
b. People often travel to the Caribbean from New England to escape cold weather, so the
demand for Caribbean hotel rooms is high in the winter. In the summer, fewer people
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c. When a war breaks out in the Middle East, many markets are affected. Because a large
proportion of oil production takes place there, the war disrupts oil supplies, shifting the
Chapter 4/The Market Forces of Supply and Demand ❖ 73
Figure 10 Figure 11
3. a. If people decide to have more children, they will want larger vehicles for hauling their
74 ❖ Chapter 4/The Market Forces of Supply and Demand
d. The rise in the price of sport utility vehicles affects minivan demand because sport utility
Chapter 4/The Market Forces of Supply and Demand ❖ 75
4. a. DVDs and TV screens are likely to be complements because you cannot watch a DVD
b. The technological improvement would reduce the cost of producing a TV screen, shifting
Figure 16
c. The reduction in the price of TV screens would lead to an increase in the demand for
76 ❖ Chapter 4/The Market Forces of Supply and Demand
5. Technological advances that reduce the cost of producing computer chips represent a decline
Chapter 4/The Market Forces of Supply and Demand ❖ 77
Because typewriters are substitutes for computers, the lower equilibrium price of computers
reduces the demand for typewriters. As Figure 21 shows, the result is a decline in both the
Figure 21
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b. A decline in the price of leather jackets leads more people to buy leather jackets,
reducing the demand for sweatshirts. The result, shown in Figure 23, is a decline in both
the equilibrium price and quantity of sweatshirts.
Chapter 4/The Market Forces of Supply and Demand ❖ 79
d. The invention of new knitting machines increases the supply of sweatshirts. As Figure 25
shows, the result is a reduction in the equilibrium price and an increase in the equilibrium
quantity of sweatshirts.
7. Ketchup is a complement for hot dogs. Therefore, when the price of hot dogs rises, the
quantity demanded of hot dogs falls and this lowers the demand for ketchup. The end result
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8. a. Quantity supplied equals quantity demanded at a price of $6 and quantity of 81 pizzas
(Figure 30).
9. The news of the increased health benefits from consuming oranges will increase the demand
10. a. Because flour is an ingredient in bagels, a decline in the price of flour would shift the
supply curve for bagels to the right. The result, shown in Figure 31, would be a fall in the
Chapter 4/The Market Forces of Supply and Demand ❖ 81
b. In part (a), we found that a fall in the price of flour led to a rise in the price of cream
cheese and a rise in the equilibrium quantity of bagels. If the price of flour rose, the
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Figure 34 Figure 35
11. a. As Figure 35 shows, the supply curve is vertical. The constant quantity supplied makes
c.
Price
Quantity Demanded
Quantity Supplied
$4
14,000
8,000
$8
11,000
8,000
8,000
8,000
2,000
8,000