Supply and Demand

Question 1

At equilibrium what does we see with demand and supply

Answer 1

the qty demanded = qty supplied

Question 2

Disequilibrium

Answer 2

demand is lower or higher than qty supplied

Question 3

surplus

Answer 3

QTY supplied is greater than qty demanded

Question 4

What happens when QTY supplied is greater than qty demanded

Answer 4

Surplus
- eventually it will fix itself

• suppliers will lower the price so the demand will increase until it hits equilibrium

Question 5

What is shortage

Answer 5

when qty demanded is greater than qty supplied

price is too low so producers make less

price being too low, people want to buy more

shortage will fix itself

Question 6

Practice: new grilling technology cuts production time in 1/2 what happnes

Answer 6

Supply curve:

Supply shifts right (increase in supply of hamburgers)

P goes down, QTY goes up?

Question 7

Increase in the price of substitutes

Answer 7

Demand Curve:

demand increases

P goes up, qty goes up

Shifts demand curve right

Question 8

price of hamburgers decreases

Answer 8

shift along the curve

Qty goes up, price goes down = shortage

REMEMBER: Price NEVER shifts a curve

Question 9

Price of ground beef increases (key input in hamburgers)

Answer 9

Supply Curve:

supply shifts lefts
Price goes up, QTY decreases

Question 10

If human finger are found in many burgers

Answer 10

Demand curve:
Demand shifts left, decrease in demand

P goes down, QTy goes down

Question 11

What are the 6 supply and demand tips

Answer 11

1. the law of demand creates a downward sloping curve
2. Law of supply
3. supply and demand need to be put together to be useful
4. There are 5 shifters of demand and 5 shifters of supply
5. double shift (demand and supply both shift at the same time)
6. when in doubt, draw it out

Question 12

explain the law of demand creates a downward sloping curve

Answer 12

Price goes up, QTY goes down and vice versa

Price goes down, Qty goes up

Demand to the dirt - going down

Question 13

Law of supply

Answer 13

upward sloping supply curve
Price goes up, QTy goes up

Price goes down, qty goes down

Question 14

explain supply and demand need to be puttogether to be useful

Answer 14

Qty d = QTY s (equilibrium)

prices does not shift the curve - change in price moves along curve

only changes QTy D and Qty Supplied

You get a shortage or surplus if it’s not at equilibrium

Question 15

Explain there are 5 shifts of demand and 5 shifters of supply

Answer 15

shifts the curve

has nothing to do with shortage or surplus

Question 16

Explain double shift (demand and supply both shift at the same time)

Answer 16

something will be indeterminate

do each part separately then combine to see whole picture

Question 17

What is the double shift rule

Answer 17

when 2 curves shift at the same time, either price or qty will be indeterminate

Question 18

When there is a double shift, how can you tell which one will be indeterminate

Answer 18

1. draw each shift separately then combine the results

Increase in supply P goes down, qty goes up
Increase in demand Price goes up, Qty goes up

Combined together, Qty goes up but Price is indeterminate

Question 19

Question: if the price of a key resource (ie peppermint in gum) goes up and the demand for gum goes up what happens to price and qty equilibrium price

Answer 19

Supply: price goes up for input Qty goes down (shifts left)

Demand: demand goes up (shifts right) Qty goes up

so price goes up

Supply price goes up, Qty down
Demand price goes up, Qty goes up

Qty is indeterminate