Chapter 3 Appendix Additional Examples of Supply and

  • Slides: 15
Download presentation
Chapter 3 Appendix Additional Examples of Supply and Demand Copyright © 2018 Mc. Graw-Hill

Chapter 3 Appendix Additional Examples of Supply and Demand Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education.

Lettuce • Supply shifts left for lettuce • Weather destroys part of the crop

Lettuce • Supply shifts left for lettuce • Weather destroys part of the crop • Demand doesn’t change • Consumers still want as much lettuce as before • Equilibrium price rises which will reduce the quantity demanded LO 7 Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-2

Lettuce Continued Price (per pound) S 2 S 1 P 2 P 1 D

Lettuce Continued Price (per pound) S 2 S 1 P 2 P 1 D 1 0 LO 7 Q 2 Q 1 Quantity (pounds) Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-3

Exchange Rates • Exchange rates are the price of one country’s currency in terms

Exchange Rates • Exchange rates are the price of one country’s currency in terms of another country’s currency • Currency appreciation • Currency depreciation LO 7 Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-4

Exchange Rates Continued Dollar price of 1 euro S 1 $1. 50 $1. 25

Exchange Rates Continued Dollar price of 1 euro S 1 $1. 50 $1. 25 D 2 D 1 0 Q 1 Q 2 Quantity of euros LO 7 Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-5

Pink Salmon • Supply shifts right for pink salmon • New technology • New

Pink Salmon • Supply shifts right for pink salmon • New technology • New fishers enter the industry • Demand shifts left for pink salmon • Increases in consumers’ income • Reductions in the price of substitutes LO 7 Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-6

Pink Salmon Continued S 1 Price (per pound) S 2 P 1 P 2

Pink Salmon Continued S 1 Price (per pound) S 2 P 1 P 2 D 2 0 Q 1 D 1 Q 2 Quantity (in pounds) LO 7 Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-7

Gasoline • Supply of gasoline decreases • Refinery breakdowns • Mideast politics and warfare

Gasoline • Supply of gasoline decreases • Refinery breakdowns • Mideast politics and warfare • Rising price of oil • Demand for gasoline increases • Consumers’ incomes increased • Low mileage SUVs popular LO 7 Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-8

Gasoline Continued Price (per gallon) S 2 S 1 P 2 P 1 D

Gasoline Continued Price (per gallon) S 2 S 1 P 2 P 1 D 2 D 1 0 Q 1 Q 2 Quantity (in gallons) LO 7 Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-9

Sushi • Supply shifts right • Increase in the number of sushi bars •

Sushi • Supply shifts right • Increase in the number of sushi bars • Demand shifts right • Consumers’ tastes for sushi increases LO 7 Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-10

Sushi Continued Price (per pound) S 1 S 2 P 1 D 2 D

Sushi Continued Price (per pound) S 1 S 2 P 1 D 2 D 1 0 Q 1 Q 2 Quantity (pounds) LO 7 Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-11

Land in San Francisco • Vertical supply curve • Quantity supplied fixed and unresponsive

Land in San Francisco • Vertical supply curve • Quantity supplied fixed and unresponsive to price changes • Demand increase causes price to rise but quantity stays the same • Demand decrease causes price to fall but quantity stays the same • Explains high real estate prices in cities LO 7 Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-12

Land in San Francisco Continued Price (per acre) S 1 P 2 P 1

Land in San Francisco Continued Price (per acre) S 1 P 2 P 1 D 2 D 1 0 Quantity of land (acres) LO 7 Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-13

Preset Prices • Preset prices can cause market imbalances • Olympics figure skating finals

Preset Prices • Preset prices can cause market imbalances • Olympics figure skating finals • Preset price results in a shortage of tickets • Olympics curling preliminaries • Preset prices result in a surplus of tickets LO 7 Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-14

Preset Prices Continued P S Price (per ticket) P P 2 b P 1

Preset Prices Continued P S Price (per ticket) P P 2 b P 1 0 a Shortage D Q 1 Q 2 Figure Skating Quantity (tickets) LO 7 P 2 S a Surplus b P 1 D 0 Q 2 Q 1 Curling Quantity (tickets) Copyright © 2018 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education. 3 A-15