1. A change in supply causes a ______ (movement along/shift of) the supply curve. A change in quantity supplied causes a ____ (movement along/shift of) the supply curve.
2. Circle the variables that change as we move along the supply curve for pencils and cross out those that are assumed to be fixed:
Quantity of pencils supplied
Price of wood
Price of pencils
Production technology
3. Arrow up or down: An increase in the price of wood shifts the supply curve for pencils_____; an improvement in pencil-production technology shifts the supply curve for pencils________; a tax on pencil production shifts the supply curve for pencils________.
4. Arrow up or down: An increase in the supply of a product _____ the equilibrium price and____ the equilibrium quantity.
5. If both demand and supply increase simultaneously, the equilibrium price will increase if the change in ______ is relatively large.
6. Arrow up or down: If supply increases while demand decreases, the equilibrium prices will ____.
7. If supply increases while demand decreases, the equilibrium quantity will decrease if the change in _____ (supply/demand) is relatively large.
8. Effect of Weather on Prices. Suppose a freeze in Florida wipes out 20 percent of the orange crop. How will this affect the equilibrium price and quantity of Florida oranges? Illustrate your answer with a graph.
9. Immigration Control and Prices. Consider the market for raspberries. Suppose a new law outlaws the use of foreign farm workers on raspberry farms, and the wages paid to farm workers increase as a result. Use a demand and supply graph to predict the effects of the higher wage on the equilibrium price and quantity of raspberries. Arrow up or down: The equilibrium price of raspberries will ______, and the equilibrium quantity of raspberries will ___________.
10. Market Effects of Import Ban. Consider the market for shoes in a nation that initially imports half the shoes it consumes. Use a demand and supply graph to predict the market effect of a ban on shoe imports. Arrow up or down: The equilibrium prices will ____, and the equilibrium quantity will_____.
11. Market Effects of a Tax. Consider the market for fish. Use a demand and supply graph to predict the effect of a tax paid by fish producers of $1 per pound of fish. Use a demand and supply graph to predict the market effect of the tax. Arrow up or down: The equilibrium price will ___ and the equilibrium quantity will _____.
12. Innovation and the Price of Mobile Phones. Suppose that the initial price of a mobile phone is $100 and that the initial quantity demanded is 500 phones per day. Use a graph to show the effects of a technological innovation that decreases the cost of producing mobile phones. Label the starting point with a and the new equilibrium with b.
13. Used Cars: Gas Guzzlers versus Gas Sippers.
Consider the market for used cars. In 2008, the price of gas rose while the price of used full-size SUVs dropped and the price of used compact cars increased.
a. Use a supply demand graph to show the effects of a higher gasoline price on the market for used full size SUVs.
b. Use a supply demand graph to show the effects of a higher gasoline price on the market for used compact cars.