Supply and Demand Practice Problems

 

1. Using the demand and supply model, draw a “market” for passenger cars.  What is the effect on equilibrium price and quantity if the price of SUVs increases?  (Hint: both supply and demand shift).

 

 

 

2. Using the demand and supply model, draw a “market” for parkas.  What is the effect on equilibrium price and quantity if Charlottesville receives 3 feet of snow in November (an accumulation far above average) at the same time as the cost of wool (an input of parkas) significantly falls?

 

 

 

3. Using the demand and supply model, graphically show what would happen to the price and quantity of donut holes if the price of donuts rise.

 

 

 

4. Show the effect on the demand for pizza by adding a $1/slice tax to the consumer. Use the supply curve to show how price and quantity change. Alternatively show the effect on supply for pizza by adding a $1/slice tax to the supplier. Use the demand curve to show how price and quantity change. Does it make a difference to the supply and/or consumer who pays the tax?

 

 

5. Graphically describe the change in either demand and/or supply for the following situations in the market for poultry.  Also note the change in price or quantity.

 

1. Avian Flu results in the mandatory disposal (not consumption) of infected poultry.

 

 

 

2. The price of pork (the other white meat) increases.

 

 

 

3. A new recipe for egg salad results in a surge in demand for eggs.

 

 

 

4. PETA successfully lobbies the U.S. government into setting a per lb. price

 

 

 

5. The United States Government puts a quota on the amount of chicken imported into the United States.