I What effect will each of the following have on the demand for product B?

1. Product B becomes more fashionable.
2. The price of substitute product C falls.
3. Income declines and product B becomes an inferior good.
4. Consumers anticipate the price of B will be lower in the near future.
5. The price of complementary product D falls.

II What effect will each of the following have on the supply of product B?

1. A technological advance in the methods of producing B.
2. A decline in the number of firms in industry B.
3. An increase in the price of resources required in the production of B.
4. The expectation that the equilibrium price of B will be lower in the future than it is currently.
5. A decline in the price of product A, a good whose production requires substantially the same techniques as does the production of B.
6. The levying of a specific sales tax upon B.
7. The granting of a 50-cent per unit subsidy for each unit of B produced.

III Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as follows:

Thousands of bushels demanded	Price per bushel	Thousands of bushels supplied	Surplus (+) or shortage (-)
85 80 75 70 65 60	$3.40 3.70 4.00 4.30 4.60 4.90	72 73 75 77 79 81	_____ _____ _____ _____ _____ _____

1. What will be the market or equilibrium price? What is the equilibrium quantity? Fill in the surplus-shortage column and use it to explain why your answers are correct.
2. Graph the demand for wheat and the supply of wheat. Be sure to label the axes of your graph correctly. Label equilibrium price "P" and the equilibrium quantity "Q." Note: Graph using "scatter plot" or draw a graph on a seperate sheet and submit (upload).
3. Why will $3.40 not be the equilibrium price in this market? Why not $4.90? "Surpluses drive prices up; shortages drive them down." Do you agree?