Supply and Demand
Practice Exercises
In each of the following instances,
illustrate (and label) the initial equilibrium position (price and quantity
exchanged) for the specified market. And
then illustrate and label the new equilibrium price and quantity exchanged.
1.
Product N is a normal good. Now
there is a
significant decrease in consumer incomes.
2.
Goods G and H are consumer substitute goods. Now
the price of good H rises substantially.
Analyze the
impact on G (that is, G’s new price and sales)
3.
Good Z is produced through a highly labor intensive
process. Now the United Z-makers
a 20% wage increase for its workers.
What will
happen to the price of Z and to the level of sales?
4.
Goods B and D are seller substitute goods. Now the
price of good D falls. Illustrate
the effects on good B.
5.
Consumers of good R hear (from usually reliable
sources (meaning, not Dan Rather) that the price of
good R is about to increase sharply.
Illustrate the
likely effects on the price and quantity exchanged.