ECON 1200

Assignment # 2- Supply and Demand (20%)

1. Following is the schedule of quantities that would be supplied and demanded at various prices for oranges.

Price	Quantity Demanded	Quantity Supplied
$10.00	200	600
9.00	250	550
8.00	300	500
7.00	350	450
6.00	400	400
5.00	450	350
4.00	500	300
3.00	550	250
2.00	600	200

a. Graph the supply and demand curves. Identify the market equilibrium price. (2 marks)

b. If 40% of the orange crop is lost due to bad weather, show the impact on the market using the chart with any changes to the supply and/or demand curves to identify the new equilibrium price. (Use the additional column on the chart as needed to calculate new quantities and graph them to identify the impact on the market.) (2 marks)

2. For each of the following situations, use supply and demand curves and a written description to explain the effect on the market, including the changes in equilibrium price and quantity and any initial shift in either supply or demand. (8 marks)

1. The effect on the market for new automobiles if auto manufacturers must pay an increase in wages for auto workers.

P

Q

1. The effect on the market for air travel if high-speed rail at 300 km/hr is introduced.

P

Q

1. The effect on the market for Netflix if prices for satellite TV double..

P

Q

1. The effect on the market for wheat if farmers improve production efficiency with better equipment.

P

Q

3. Use diagrams and a written explanation to explain the difference between a change in demand and a change in quantity demanded.(2 marks)

4. What will be the problem created in the following market if the price is $11.00? How will it be corrected? (2 marks)

5. Use supply and demand curves and an example to explain how speculation affects market prices. (2 marks)

6. When a new product is introduced there is initially a small quantity being produced during the introduction stage. As consumers become more aware of the product the demand increases and as the product becomes more accepted in the market more competitors enter. Use a supply and demand diagram to show what happens. (2 marks)