Supply & Demand Part 1 Study Guide
The Law of Demand states that as P_____ QD_____, and as P______ QD______.
Draw and fully label a demand graph using the data in the table below:
Price Quantity Demanded
$0.50 200
$1.00 150
$1.25 100
$2.00 50
$2.50 0
Answer the following questions using the graph below:
Market for bags of industrial fertilizer
1. How many bags of industrial fertilizer will be purchased at a price of $20? Remember to put
your answer in thousands. _______________
2. What would cause QD to drop from 50 bags of industrial fertilizer to 10 bags of industrial
fertilizer?________________________________________________________________
The Law of Supply states that as P______ QS______, and as P______ QS _______.
Draw and fully label a supply graph based on the data in the table.
Draw and fully label a COMPLETE supply and demand graph.
o Include:
Price axis
Quantity axis
Supply curve
Demand curve
Equilibrium point
Equilibrium price (market clearing price)
Equilibrium quantity
Equilibrium is the point where ____________________________________________________.
What is the equilibrium price and equilibrium quantity on the following graph?
______________________________________________________________________________
If a market price is set higher or lower than the equilibrium price it is called
__________________________.
Excess demand is also called______________________________.
Excess supply is also called _______________________________.
Price Quantity Supplied
$2.00 8
$4.00 10
$6.00 14
$8.00 18
Application Practice
Demand Schedule for cookies sold in the school store
Price (per cookie)
Quantity Demanded
Quantity Supplied
$0.10 800 100
$0.25 600 200
$0.50 400 400
$0.75 200 600
$1.00 100 800
1. In the space to the right of the supply & demand schedule, graph out the data provided (on the same
graph).
2. The equilibrium price ___________. The equilibrium quantity is ____________. How did you know
this was the equilibrium price and quantity?________________________________________________
3. Assume that Ms. Moody was selling the cooks for $1.00 each. What type of disequilibrium is occurring
in the market (shortage or surplus)?________________________ How did you
know?_____________________ What will Ms. Moody most likely do to prices?__________________
4. Assume that Ms. Mood was selling the cookies for $0.25 each. What type of disequilibrium is occurring
in the market (shortage or surplus)?________________________ How did you
know?_____________________ What will Ms. Moody most likely do to prices?__________________
5. Suppose that because of the concerns about childhood obesity, cookies can no longer be sold for less
than $1.00.
a. What type of price control is this?__________________ How do you know?
________________________________________________________________________
b. What type of disequilibrium is caused by this price control? ___________________________
6. Suppose that due to concerns about affordability, cookies can no longer be sold for more than $0.25.
a. What type of price control is this?__________________ How do you know?
________________________________________________________________________
b. What type of disequilibrium is caused by this price control? ___________________________
7. A government sets a price of $0.10 per cookie.
a. What type of price control? __________________
b. How can you tell?_______________________________________
8. A government sets a price of $0.75 per cookie.
a. What type of price control? __________________
b. How can you tell?_______________________________________
Market Equilibrium and Disequilibrium Practice
Part 1: The following is a list of characteristics. Please indicate whether the characteristics apply to market
equilibrium, price floor, or price ceiling.
1. Quantity supplied equals quantity demanded _______________________________________
2. Government sets a maximum price that can be charged ______________________________
3. Government sets a minimum price that can be charged _______________________________
4. Creates excess demand (shortage) _____________________________
5. Creates excess supply (surplus) ________________________________
6. Price is higher than the equilibrium price _____________________________
7. Price is lower than this equilibrium price ________________________________
Part 2: Read each of the following scenarios and indicate whether it involves a price floor or price ceiling.
1. The government decides to set a minimum price on tires to keep people from buying so many.
a. Is this a price floor or price ceiling?_______________________
b. What type of disequilibrium results?______________________
c. Draw the graph for this situation.
2. The government decides that cheddar cheese prices are rising too quickly and decides to set a
maximum price for cheddar cheese.
a. Is this a price floor or price ceiling?_________________________
b. What type of disequilibrium results?________________________
c. Draw the graph for this situation.
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