Question

1. Following is the schedule of quantities that would be supplied and demanded at various prices for oranges. Price Quantity Demanded Quantity Supplied $10.00 200 600 9.00 250 550 8.00 300 500 7.00 350 450 6.00 400 400 5.00 450 350 4.00 500 300 3.00 550 250 2.00 600 200

a. Graph the supply and demand curves. Identify the market equilibrium price.

b. If 40% of the orange crop is lost due to bad weather, show the impact on the market using the chart with any changes to the supply and/or demand curves to identify the new equilibrium price. (Use the additional column on the chart as needed to calculate new quantities and graph them to identify the impact on the market.)

2- For each of the following situations, use supply and demand curves and a written description to explain the effect on the market, including the changes in equilibrium price and quantity and any initial shift in either supply or demand.

1. The effect on the market for new automobiles if auto manufacturers must pay an increase in wages for auto workers.

2. The effect on the market for air travel if high-speed rail at 300 km/hr is introduced.

3. The effect on the market for Netflix if prices for satellite TV double..

4. The effect on the market for wheat if farmers improve production efficiency with better equipment.

Answer 1

1.a. Market equilibrium price is determined where demand equals supply. In the demand and supply schedule given below. The quantity demanded equals quantiy supplied when price is $6.

Price	Quantity demanded	Quantity supply
10	200	600
9	250	550
8	300	500
7	350	450
6	400	400
5	450	350
4	500	300
3	550	250
2	600	200

b.

Price	Quantity demanded	Quantity supply	Quantity supplied when 40% loss
10	200	600	360
9	250	550	330
8	300	500	300
7	350	450	270
6	400	400	240
5	450	350	210
4	500	300	180
3	550	250	150
2	600	200	120

If 40% of the orange crop is lost due to bad weather, Quantity supplied of orange decreases. Quantity supplied means that amount of commodity producers are willing to supply at given prices. Withe 40% crop loss, quantity supplied decrease. As a result supply curve shifts left upward direction. Newly shifted supply curve intersect demand curve where price $8. Thus the equilibrium price is $ 8.

2.

a.The effect on the market for new automobiles if auto manufacturers must pay an increase in wages for auto workers.

Increase in wages increases cost of production. When cost of production increases, producer decreases quantity they supply at given price. Decrease in quantity supplied cause supply curve to shift upward in the left direction. As a result equilibrium price shifts from P2 to P1 and quantity supply decreases from Q2 to Q1.

a.The effect on the market for air travel if high-speed rail at 300 km/hr is introduced.

When high-speed rail at 300 km/hr is introduced, few people who used to travel by air may prefer traveling in high speed rail. As a result demand for air travel decreases. Initially market price for air travel was p1 and quantity demanded was Q1. with the introduction of high-speed rail, demand for air travel decreases, as a result demand for air curve shift downward in left direction. New equilibirum is at E1, where equilibrium price decreases from P1 tp P2 and equilibrium quantity decreases from Q1 to Q2.

a.The effect on the market for Netflix if prices for satellite TV double..

when price of satellite TV doubles, demand for netflix increases. As a result demand for Netflix shift upward to right direction while supply curve remain same. with the price of satellite Tv doubles, demand for netflix increases demand curve shifts from DD to D1D1, which Equilibrium increase price from P1 to P2 and equilibrium quantity increases from Q1 to Q2.

a.The effect on the market for wheat if farmers improve production efficiency with better equipment.

When farmers increase production efficiency, quantity supplied increase. As a result supply curve shifts from SS to S1S1, while demand curve remains same. with shift in supply curve equilibrium price decreases from P to P1 and equilibrium quantity increases from Q to Q1