Supply, Demand, and Price Graphs

  • Analyze each graph or situation then answer the questions that follow.

The graph below shows a shift in the supply curve for diamonds. Use the graph to answer the questions 1-4.

  1. Has the supply curve shifted to the right or to the left?
  1. Has total supply increased or decreased?
  1. Circle the choice below that gives one possible explanation for this change.
  1. The costs of producing diamonds went up.
  2. Better technology helped producers supply more diamonds at a faster rate.
  3. More and more diamonds were being used for engagement rings.
  1. Suppose that a diamond company discovers how to manufacture synthetic diamonds. And the company can make better profits manufacturing diamonds rather than mining them. What are the opportunity costs? How might the supply of diamonds be affected?
  1. What effect would each of the following hypothetical events have on the supply and/or the demand curves?
  1. Last week the Surgeon General of the United Sates announced that eating corn substantially increases life expectancy. How would this news change the supply or demand curve?
  1. Suppose that the Surgeon General had announced that eating corn will make your hair fall out. How would this news affect the supply and demand curves?
  1. A strange blight ruined a substantial portion of the nation’s corn crop.

Use the graph below to answer questions 6-11.

Supply and Demand for Lettuce:

  1. Label the demand curve “D” and the supply curve “S.”
  1. What is the equilibrium price?
  1. Why does the price of lettuce fluctuate in the grocery store?
  1. Illustrate on the graph what happens when farmers have a bumper (extra) crop of lettuce.
  2. What happens to the price?
  1. What happens to the quantity sold?
  1. Is lettuce an elastic or inelastic good? Explain.
  1. What other foods are affected by the price of lettuce? How and why?

Use the following graph to answer questions 12-16.

Supply and Demand for perfume:

  1. Label the demand curve “D” and the supply curve “S” on ALL of the graphs. What is the equilibrium price? Label it on ALL of the graphs.
  1. If perfume were selling for $12.00 a bottle, what would the demand be? What would the supply be? Show both on graph A.
  1. If perfume were selling for $30.00 a bottle, what would the demand be? Supply? Show both on graph A
  1. If the cost of producing perfume were to increase, what would happen to the price? Quantity sold? Draw this on graph B.
  1. If consumer tastes change and consumers desire more of the product, show what would happen in the marketplace. (Draw it on graph C.)

Illustrate changes in supply and demand on the following graphs. You will need to decide which curve each scenario is concerned with. Make sure you focus on the underlined product. Remember that there are different determinants for supply and demand.

  1. Rice

Scientists in China have discovered a way to produce robots that can work in the rice fields 20 hours per day. These synthetic humans need no nourishment and are completely mindless. They can be produced cheaply and in large quantities.

Effect on equilibrium price: increasedecrease

Determinant ______

  1. Cell Phones

After much heated debate, Congress raises the minimum wage to $8.00 per hour. Discretionary income of many teenagers expected to rise.

Effect on equilibrium price: increasedecrease

Determinant ______

  1. X-Box games

Due to increases in technology, retail prices of the X-Box fall.

Effect on equilibrium price: increasedecrease

Determinant ______

  1. Memory Cards

The price of gold, a resource used in the production of memory cards, skyrockets. Sony decides to concentrate solely on the manufacture of digital cameras.

Effect on equilibrium price: increasedecrease

Determinant ______

  1. Fish – England

Potato famine reduces supply of potatoes and sends potato prices soaring. (Hint: fish and fries is a very popular dish in England.)

Effect on equilibrium price: increasedecrease

Determinant ______

  1. Orchids

The island of Hawaii has experience extremely bad weather this year. There were several severe storms and gusts up to 75 mph. Much of Hawaii’s flower crops have been damaged, especially the delicate orchids.

Effect on equilibrium price: increasedecrease

Determinant ______