1. Draw a supply decrease. Include the original demand and supply curves in your graph. What happens to the

price and quantity?

2. Draw a demand increase. Include the original demand and supply curves in your graph. What happens to

the price and quantity?

3. Draw a price floor and Indicate on the graph where the shortage or surplus is

located. Does the price floor result in more quantity or less quantity demanded? Does the price floor result in

more quantity or less quantity supplied? Show both on the

graph.

4. Draw a price inelastic demand curve. Then draw a supply decrease on the same

graph. Which changed more, the price or quantity?

5. Is a price inelastic demand more likely a necessity or a luxury? Does it have a few

or a lot of substitutes?

6. Draw a price elastic supply curve. Then draw a demand increase on the same

graph. Which changed more price or quantity?

7. Suppose a tax is placed on the producer. What happens to supply? Draw the

shift in supply assuming that demand is elastic. Show in the graph who bears

the burden of the tax (in other words, is the producer able or unable to pass the

tax cost to the consumer?)