1_Demand and Supply

Demand and Supply Answer the following questions. Tips 3 steps 1. Draw the demand and supply curve and show the initial equilibrium market price and equilibrium market quantity 2. Decide whether the event shifts the demand curve, the supply curve or both curves. 3. Decide whether the curve shift to the right or left. 4. Find the new equilibrium market price and equilibrium market quantity Questions 1. Explain each of the following statements using supply-and-demand diagrams. a. “During the wet season and there are floods, the price of vegetables rises in the market throughout the country” b. “During the peak season for tourism, most hotels room in Penang is fully booked and hotel room prices are high.” c. “When there is war in Middle East, the price of petrol rises, and the price of used Volvo falls.”

2. Using the supply and demand diagram, show the effects on the market for: a. Video cassettes when VCDs (video compact disc) were introduced in the late 1990s b. VCD players in the early 2000s when DVDs (digital versatile disc) were introduced

3. Using demand and supply curves, show the effect of each of the following on the market for cigarettes: a. A cure for lung cancer is found. b. The price of cigars increases. c. Wages increase substantially in states that grow tobacco. d. A fertilizer that increases the yield per ache of tobacco is discovered. f. More states pass laws restricting smoking in restaurant and public places.

4. (Equilibrium) Assume the market for corn is depicted as in the table that appears below. a. Complete the table below. Price per Bushel (RM)

Quantity Demanded (millions of bushels)

Quantity Supplied (millions of bushels)

1.80

320

200

2.00

300

230

2.20

270

270

2.40

230

300

2.60

200

330

2.80

180

350

Surplus / Shortage

Will Price Rise or Fall?

b. What market pressure occurs when quantity demanded exceeds quantity supplied? Explain. c. What market pressure occurs when quantity supplied exceeds quantity demanded? Explain. d. What is the equilibrium price? e. What could change the equilibrium price? f. At each price in the first column of Exhibit 12, how much is sold?