Question 1

Using supply/demand analysis,explain the reason that the increased production of ethanol (a gasoline additive made from corn)is raising the price of tortillas (a type of bread made from corn).What effect would this price rise have on poor people?

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Question 2

Graph the information in the following table and find equilibrium price and quantity.Suppose that the demand for good XYZ rises by 5 units at every price because of clever advertising.What happens to equilibrium price and quantity? Under what conditions would it be profitable to advertise?
Price
Quantity Demanded
Quantity Supplied
$0
100
0
$0.50
95
20
$1.00
90
40
$1.50
85
60
$2.00
80
80
$2.50
75
100
$3.00
70
120
$3.50
65
140
$4.00
60
160
$4.50
55
180

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Question 3

Referring to the following graph,what is the equilibrium price and quantity? What happens when prices are above and below the equilibrium levels?

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Question 4

Assume that Walmart finds that its inventory of pink ties is unexpectedly rising.Illustrate this situation,using a supply/demand diagram.Explain how price adjustments would be used to reduce the excess inventory.

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Question 5

Suppose E.coli (a harmful bacteria)is found in a certain type of vegetable.If the authorities were to remove the vegetable from the market,what would happen to the price of the vegetable? Suppose the growers could not reassure consumers that future contamination will not occur.What would be the long-term effect on equilibrium price?

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Question 6

Suppose that a product's supply and demand curves both shift to the left.What will definitely happen to price and/or quantity,and which effects are indeterminate?

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Question 7

How is the equilibrium price determined? What occurs if the price is above the equilibrium price? What occurs if the price is below the equilibrium price?

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Question 8

What happens to the equilibrium price and quantity if demand and supply move in the same versus opposite directions?

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Question 9

Suppose suppliers expect the market price to fall in the future.How might the expectation become a self-fulfilling prophecy?

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Question 10

Describe what happens to equilibrium price and quantity when only supply or only demand changes.Use graphs to illustrate your answer.

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Quiz 3: Supply and Demand