EC 2113 - Principles of Macroeconomics Professor: Dr. Heriberto Gonzalez Table 1 Price (dollars Quantity Quantity per pound demanded supplied of wheat) 4 36,000 4,000 8 32,000 8,000 12 28,000 12,000 16 24,000 16,000 20 20,000 20,000 24 16,000 24,000 28 12,000 28,000 32 8,000 32,000 36 4,000 36,000 Use Table 1 to answer following questions. Draw a supply-demand graph for wheat. Label all parts of the graph, including the equilibrium price and quantity. No label, no credit! a) If the price of wheat is $16. a. In your graph, identify the quantity supplied at $16. Label it as Qs. b. In your graph, identify the quantity demanded at $16. Label it as Qd. C. At $16, what is greater the quantity demanded or the quantity supplied? What is this situation called, shortage or surplus? d. Did any of the determinants of demand or supply change? If so, which one? If supply and/or demand shift, a NEW equilibrium will arise; if no shift in supply and/or demand is observed, then the equilibrium will be restore by adjusting the price. e. If the price is $16, what is going to happen? Explain. 23 EC 2113 - Principles of Macroeconomics Professor: Dr. Heriberto Gonzalez Draw a supply and demand graph and explain briefly what happen to the equilibrium of the market in following scenarios. Label all parts of the graph, including the equilibrium price and quantity. You do NOT need data for this; just give the curves their usual shape. Label your graph! Steps to do your analysis. A. Identify equilibrium. Draw Supply and Demand and identify your equilibrium price and quantity. B. Identify what curve is changing. Supply or Demand? Identify the direction of the change. Is increasing or decreasing? D. Identify your new equilibrium. E. Explain why this is happening? 1. Suppose that there is an announcement that chocolate increases the possibility to get cancer. What would happen to equilibrium price and quantity in the market for Lindt chocolate?EC 2113 - Principles of Macroeconomics Professor: Dr. Heriberto Gonzalez 2. Suppose that the price of Godiva chocolate increases. What would happen to equilibrium price and quantity in the market for Lindt chocolate5 EC 2113 - Principles of Macroeconomics Professor: Dr. Heriberto Gonzalez 3. Suppose that the price of cocoa beans increases. What would happen to equilibrium price and quantity in the market for Lindt chocolate? 4. Suppose that consumers consider Lindt chocolate an expensive treat. What would happen to equilibrium price and quantity in the market for Lindt chocolate if people lose their jobs?\fEC 2113 - Principles of Macroeconomics Professor: Dr. Heriberto Gonzalez Ill. Multiple choice Figure 1. Fruit Snack Market Price (dollars per fruit snack) Da Quantity (fruit snacks] In Figure 1, which movement reflects an increase in demand? From point a to point e. From point a to point b. From point a to point c. From point a to point d. In Figure 1, which movement reflects a decrease in quantity demanded? From point a to point e. From point a to point b. From point a to point c. From point a to point d. In Figure 1, which movement reflects an increase in the price of a substitute for fruit snacks? From point a to point e. From point a to point b. From point a to point c. From point a to point d. In Figure 1, which movement reflects an increase in the price of a complement for fruit snacks? From point a to point e. From point a to point b. From point a to point c. From point a to point d. 7EC 2113 - Principles of Macroeconomics Professor: Dr. Heriberto Gonzalez Figure 2. Oil Market Price (dollars per barrel of oil) Quantity (barrels of oil] In Figure 2, an increase in the supply of oil would result in a movement from point a to point e. point a to point b. point a to point c. point a to point d. In Figure 2, an increase in the quantity of oil supplied is shown by a movement from point a to point e. point a to point b. point a to point c. point a to point d. In Figure 2, a decrease in the quantity of oil supplied is shown by a movement from point a to point e. point a to point b. point a to point c. point a to point d. IV. Changing Supply and Demand at the same time Use graphical analysis to get a conclusion about what would be the new equilibrium (quantity and price) if, in the US market for orange juice, two events occur at the same time. (HINT: Identify the three possible scenarios) A colder winter than usual destroyed 70% of the orange harvest in Florida, the primary producer of orange in the US. The National School Lunch Program (NSLP) is folding the ration of orange juice in all schools across the country to increase the supplement of vitamin C in kids 12 years and younger. 86 When Supply and Demand both change at the same time , we have three possible scenarios: Demand Change= Supply Change Demand Change Supply Change Template. A Simultaneous Increase in Supply and Demand. Case: in Demand & .S Supply Price EC 2113 - Principles of Macroeconomics Professor: Dr. Heriberto Gonzalez E E Conclusion