Concept Covered:Supply and Demand: Equilibrium

4. These are the supply and demand schedules for good X:

QuantityQuantity

PriceSuppliedDemanded

$10183

9164

8145

7126

6107

588

469

3410

2211

1012

a)What is the equilibrium price and quantity? At this equilibrium, what is the producer's revenue?

b)If the government sets a price of $8 for X, what will be the price, quantity, and revenue? Will there be a shortage or surplus of X?

c)If the government sets a price of $3, answer the same questions as in b).

d)Suppose the demand for X increases, so that at each price, consumers want to buy three more units of the good. What happens to price, quantity, and revenue? Why has the quantity sold not increased by three units?

Concepts Covered:Supply and Demand:Changes in Determinants and Illustration of Government Interference with Free Market

5. Use supply and demand curves to show the change in the price of bread and the quantity sold, when these events occur:Note one graph for each letter (total 7). HINT:Bread and Potatoes are Substitutes;Price Floor (effective price above market equilibrium) Price Ceiling(effective price below market below market equilibrium)

a)The population grows.

b)People's incomes fall and unemployment increases in a recession.

c)The price of potatoes rises.

d)The price of butter rises.

e)A drought occurs in the wheat-growing regions.

f)To protect farmers' incomes, the government sets an effective price floor for wheat.

g)To protect consumers from inflation, the government sets an effective price ceiling for bread.