Problem 3. The demand and supply schedules for potato chips are

Quantity Quantity

Price Demanded Supplied

(cents per bag) (millions of bags per week)

50 160 130

60 150 140

70 140 150

80 130 160

90 120 170

100 110 180

a. Draw a graph of the potato chip market and mark in the equilibrium price and quantity. Have price on the vertical axis and quantity on the horizontal axis.

b. If the price is 60 a bag, is there a shortage or a surplus, and how does the price adjust?

Problem 4. In Problem 3, a new dip increases the quantity of potato chips that people want to buy by 30 million bags per week at each price.

a. Does the demand for chips change? Does the supply of chips change? Describe the change.

b. How do the equilibrium price and equilibrium quantity of chips change?

Problem 5. In Problem 3, if a virus destroys potato crops and the quantity of potato chips produced decreases by 40 million bags a week at each price, how does the supply of chips change?

Problem 6. If the virus in Problem 5 hits just as the new dip in Problem 4 comes onto the market, how do the equilibrium price and equilibrium quantity of chips change?