Using the attached and assuming demand of Qd = 150 - 3P and supply of Qs = 2P - 10, with P1=32 and Q1=54, suppose a temporary supply shock due to higher energy prices causes the supply curve to decrease, shifting the curve up by $10 for every given quantity Q. ? Determine the new supply equation. ? Solve for equilibrium price P2 and quantity Q2. ? Depict the original supply S1, the new supply S2, and the original demand D1 on the usual P, Q diagram. Label all intercepts (including two intercepts for the demand curve and one intercept for the supply curve). Clearly indicate and label the new market equilibrium. ? Graphically indicate the areas of Consumer Surplus (CS2) and Producer Surplus (PS2) that resulted from the new market equilibrium. ? Compute the values of Consumer Surplus (CS2) and Producer Surplus (PS2) associated with the new market equilibrium, clearly indicating the units that CS and PS are measured in. ? What was the impact of the temporary supply shock on consumers and producers, based on the comparison of CS and PS in Questions 1 and 2? In other words, were each of these two groups of market participants hurt or made better off by change? Why?

Price Demand and Supply Curve 55 S1 50 45 40 CS1 35 P1=32 30 25 PS1 20 15 D1 10 5 O Quantity 0 5 10 15 20 25 30 35 40 45 50 60 65 70 75 80 85 90 95 100 105 110 115 120 125 130 135 140 145 150 155 Q1=54