Question

Demand and Supply
Graph each question separately. Make sure to start with equilibrium and then shift the supply or demand curve to answer the question.

1. Using the information bellow, Draw the Demand and supply Curves for Candy Bars to find the initial equilibrium price and quantity.                                               

                                                                        Demand

                                           P                           Q                          Pt.

                                           $1.25                   1                           A

                                           $100                    2                           B

                                           $0.75                   3                           C

                                           $0.50                   4                           D

                                           $0.25                   5                           E

                                                          Supply

P                                                                      Q                          Pt.

$1.25                                                8                           A

$1.00                                                7                           B

$0.75                                                5                           C

$0.50                                                3                           D

$0.25                                                1                           E

Now show what happens to the equilibrium price and quantity as an independent graph for each of the following events. (Make sure to include both the supply and demand curves and draw a separate graph for each question below):

2) candy stops heart disease

3) the price of chocolate increases

4) Tech. advances in how candy is made

5) we tax candy.

Make sure you do a separate graph for each event/question starting with the initial equilibrium and then showing the shift in either the supply and demand curve. Then make sure that you show the new equilibrium price and quantity.

Answer 1

2) As candy stops heart disease, consumers will demand more of it to take care of their health which will shift demand curve to its right from D to D1 thereby raising the equilibrium price andf quantity.

3) As price of chocolate increases, consumers will find candy bars cheaper because both of them are substitute goods and raise demand of candy bars. It will shift demand curve to its right from D to D1 thereby raising the equilibrium price andf quantity.

4) Technological advances will help producers in producing more of the candy bars with same inputs. It will increase the supply of candy bars which will reduce the price of it and raise equilibrium quantity.

5) If we tax candy, there would be decline in producer profit which will induce them to produce less of the candy. It will shift supply curve to its left which will raise the equilibrium price and reduce equilibrium quantity.