'~Combining Supply and DemandScenario: The following shows a demand and supply schedule listing CDs demanded and supplied (in the millions) per

week at each price.

• Graph each the following demand/supply schedules on one demand graph and then answer the questionsbelow:

Price Per Quantity Quantity Shortage/Compact Demanded Supplied Surplus

Disc (QS - QD)

$6 0 95 2 6

4 3 53 4 42 6 31 9 0

a. What is the equilibrium price? _

b. What is the QD and QS at the equilibrium price? _

c. What is the surplus at $6? _

d. What is the shortage at$2 _e. , How does a surplus affect the price of a product? . .i"'If . ' ",0

f. ' 'H~wdoes a shortage affect'the price of a product? ~ ~ _

Changes in DemandScenario: The following schedule shows a change in demand based on the price of a related product. The demandincreased for CDsbecause the price of CD players dropped.

Price Per Quantity Quantity Quantity ShortageCompact Demanded Demanded Supplied or

Disc (CD (CD Surplus

Players Players (QS-

$75) $50)newQD)

$6 0 4 9

5 2 6 6

4 3 7 5

3 4 8 4

2 6 11 3

1 9 13 0

a. What happened to the original demand curve? _b. How was the equilibrium point affected? _c. What is the surplus at $6.00? _d. What is the shortage at $2.00? _e. How did this scenario benefit the supplier of CDs? _

Changes in SupplyScenario: The following schedule shows a change in supply based on new technology and methods of producing CDs.The supply increased for CDs because the new technology allowed the supplier to produce CDs at a reduced rate.

Price Per Quantity Quantity Quantity Shortage/Compact Demanded Supplied Supplied Surplus

Disc (old (new (New QStechnology) technology) minus

QD)

$6 0 9 14

5 2 6 12

4 3 5 10

3 4 4 8.

2 6 3 6

1 9 0 3

a. What happened to the original supply curve? _b. How was the equilibrium point affected? _c.What is the surplusat$6.00? ~_

. Q. ,'WhyistherehOlonger a sh~rtage at $2.00? . ,,e.,'"Howdid this scenario benefit the' consumers ofCDs?_' _

Changes in Supply and DemandScenario: The following schedule shows a change in supply and demand simultaneously for CDs.

b., What would happen to the price of CD's if analternative product, such as the iPod, became popularand shifted the demand curve back to D1? (all things remaining the same) _What would happen to the price of CD's if an input for creating cd increased and shifted the supply curve back to51? (all things remaining the same) _

Price Per Quantity Quantity Quantity QuantityCompact Demanded Demanded Supplied Supplied

Disc (CD' (CD (old (newPlayers Players technology) technology)$75) $50)

$6 0 4 9 14

5 2 6 6 12

4 3 7 5 10

3 4 8 4 82 6 11 3 6

1 9 13 0 3

date --------period _

Practice: IIMovement Along" versus IIShift" .Demand Curve (check the correct answer)·

Example.

Movement along the demand curve A shift in the demand curve1. Mammoth Mountain hikes the

price for ski tickets and salesplummet.

2. Lackof snow keeps the skiersaway.

3. An increase in the excise taxon cigarettes causes youngersmokers to quit.

4. Cutting cigarette ads from TVcauses cigarette smokingamong teens to fall.

S. Nike sales fall as Skecher shoesgain popularity.

. ·6,: Mortg~ge rates are at an a.ll :. . ..

.. ... :.., ..

.'. ., .. , . ...

time low;'~~driew home'lo~~. . . . ...

applicatio,ns soar.7. Abooming economy spurs

..

home sales

. Supply Curve (check the torrect:~mswer).

Example Movement along the ~ curve A shift inthe ~ curve1. As home prices rise~more

people put outa For Sale sign.2. Personal bankruptcies rise

with the recession, forcinghomeowners to sell.

3. College grads avoid teachingjobs as starting teachersalaries fall.

4. Worsening working conditionsin urban schools chase awayprospective teachers.

S. As the price of airline ticketsrise, airlines add more flights.

6. The price of jet fuel drops andairlines expand the number offlights.

date --------period _

Practice: Changes in Equilibrium Price & Quantity I(write the change, if any, in the appropriate box)

Example Demand shifts Supply shifts Equilibrium price Equilibrium quantityright or left? right or left? up or down? up or down?

1. Demand for colorful prom nightattire boosts sales of fuchsiacummerbunds.

2. The expiration of drug patentsincreases the number of genericdrugs available to consumers.

3. Panic reigns on Wall Street asmillions of stockholders sellsimultaneously.

4. GM and Ford overestimatedemand and produce too many

. - ..

. cars iil the midst of aslowdowl1 ::. . . ..'.

". : , .' ". .'.... - .

in the economy..

5. The entry of hundreds of nailsalons in southern Californiadrags down prices and profits.

. . " .. . .'

"6 •. Airline pilots hegotli~tea ,

, , ..

dramatic salary increase, andairlines are forced to raise. ticketprices.

7. Mexico opens a deep-waterport in Ensenada and shippersshun the LA port. (The market isshipments to the LA port.)

8. Luxury home sales fall as thestock market sputters andwealth falls.

9. Competition in the fast-foodindustry increases the number .. ~~.'

of restaurants.

10. Parking fees for the New YorkYankees skyrocket and ticketsales fall. (The market is forbaseball tickets.)