Instructions

• Read the scenario.
• Complete the problem sets, numbering your answers. Be sure to answer both parts.
• Submit your work

Scenario

Ishmael owns a convenience store in a large city. Many of the customers are on a fixed income which means they do not have a lot of extra money. Ishmael finds it is difficult to raise his prices without losing sales. He has noticed over time that his willingness to supply various items has changed.

Problem Sets - Shift in Supply Curve

Below you will see three factors that have caused the supply to change. Answer all three parts for each problem set.

A. When the cost of electricity went up, Ishmael took out one of two bakery ovens and offered fewer baked goods for sale.

1. Explain why the supply of baked goods has changed.
2. Graph the change making a new supply curve.

B. When Ishmael found he could sell energy drinks to high school students, he restocked half his toilet paper shelves with energy drinks.

1. Explain why the supply of energy drinks has changed.
2. Graph the change making a new supply curve.

C. When Ishmael found he could rent the store next door for only $700 a month, he increased the size of his store and his selection of products by one-third.

1. Explain why the supply for his products has changed.
2. Graph the change making a new supply curve.

D. When Ishmael heard that a big convenience store was going to move in down the block, he stopped renting the store next door and cut his product selection back to what it was in the past.

1. Explain why the supply for his products has changed.
2. Graph the change making a new supply curve.