1 Explain in words why the supply curve slopes upward. 2. Explain in words why the demand curve slopes downward. 3. Suppose that the supply and demand schedulesfor a local electric utility are as follows: Price 1716:15.14113.12111 Quantitysupplied 11 9 7 5 3 1 0 Quantityd e m a n d e d 2 3 4 5 6 7 8 The price is in cents per kilowatt hour (kWh), and the quantities are in millions of kilowatt hours. The utility does not operate at prices less than 12 cents per kWh. a. Using graph paper and a ruler, or a computer spreadsheet or presentation program, carefully graph and label the supply curve for electricity. b. On the same graph,d r a w and label the demand curve for electricity. c. Whati s the equilibriump r i c e of electricity? The equilibrium quantity? Label this point on your graph. d. At a price of 16 cents per kWh, what is the quantity supplied? What is the quantity demanded? What is the relationship between the quantity supplied and the quantity demanded? What term do economists use to describe this situation? e. At a price of 13 cents per kWh, what is the relationship between the quantity supplied and the quantity demanded? What term do economists uset o describe this situation? f. Sometimes, cities experience "blackouts," inwhich the demands on the utility are so high relative to its capacity to produce electricity that the system shuts down, leaving everyone in the dark. Using the analysis that you have just completed, describe an economic factor that could make blackoutsm o r e likelyt o occur. 4. Continuing on from the previous problem (in question 3), suppose that economic growthincreases people's need for electricity. The supply side of the market does not change, but at each price buyers now demand 3 million kWh more than before. For example, at a price of 17 cents per kWh, buvers now demand 5 million kWh instead of 2 million kWh. a. On a new graph, draw supply-and-demand curves after the impact of economic growth. Also, for reference, mark the old equilibrium point from the previous exercise, labeling it E. b. fI the price were to remain at the old equilibrium level (determined in part (c) above), what sort of situation would result? c. What is the new equilibrium price, witht h en e wdemand curve? The new equilibriumquantity? Give this point onyour graph thelabel E2. d. Has there been a changei n demand? Hasa change in the price (relativet o the original situation) led to a change in the quantity demanded? e. Has there been a change in supply? Has a change in the price (relative to the original situation) led to a change in the quantity supplied?

6. At a price of $5 per bag, William is willing to supply three bags of oranges, Marguerite two bags, and Felipe five bags. At a price of $7 per bag, William is willing to supply five bags, Marguerite four bags, and Felipe seven bags. Graph and carefully label the individual supply curves, and then graph the market supply curve for oranges a t theset w o prices).

7. At a price of $8 per ticket, Shalimar goes to two movies per month, Wen goes to one movie per month, and Adam goes to three movies per month. At a price of $10 per ticket, Shalimar goes to one movie, Wen goes to 0 movies, and Adam goes to two movies. Graph and carefully label the individual demand curves, and then graph the market demand curve for movie tickets (at these two prices).

8. Suppose that a newspaper report indicates that the price of wheat has fallen. For each of the following events, draw a supply-and-demand graph showing the event's effect on the market for wheat. Then state whether the event could explain the observed fall in the price of wheat. a. A drought has hit wheat-growing areas. b. The price of rice has risen, so consumers look for alternatives. c. As aconsequence of increasing health concerns, tobacco farmers have begun to plant other crops. d. The government has a price floor for wheat and increases it.

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The supply curve slopes upward because as the price of a good or service increases suppliers are willing to offer more of that good or service to the market This is because higher prices incentivize p... View the full answer