Supply and Demand drawing worksheet
The answer key prints on its own page, so hand out everything before it.
Supply and Demand drawing worksheet · problem 1 of 4
Assume the market for restaurant meals in the country of Beloria is initially in equilibrium. Household incomes in Beloria rise, and restaurant meals are a normal good. Show the effect of this change on the market for restaurant meals, assuming all else is held constant.
Draw the initial equilibrium, show the change, and label every curve and both axes. Mark the new equilibrium.
Explain your reasoning:
Supply and Demand drawing worksheet · problem 2 of 4
The market for sugary soda is initially in equilibrium. A widely publicized medical study links regular soda consumption to serious health problems, and many consumers change their view of the product. Show the effect of this change on the market for sugary soda, assuming all else is held constant.
Draw the initial equilibrium, show the change, and label every curve and both axes. Mark the new equilibrium.
Explain your reasoning:
Supply and Demand drawing worksheet · problem 3 of 4
The market for solar panels is initially in equilibrium. A technological breakthrough allows manufacturers to produce each panel using fewer resources. Show the effect of this change on the market for solar panels, assuming all else is held constant.
Draw the initial equilibrium, show the change, and label every curve and both axes. Mark the new equilibrium.
Explain your reasoning:
Supply and Demand drawing worksheet · problem 4 of 4
The market for bread is initially in equilibrium. A severe drought destroys much of the wheat harvest, sharply raising the price of wheat, a key input in bread production. Show the effect of this change on the market for bread, assuming all else is held constant.
Draw the initial equilibrium, show the change, and label every curve and both axes. Mark the new equilibrium.
Explain your reasoning:
Supply and Demand drawing worksheet: answer key
1. Incomes and Restaurant Meals: demand shifts right
Restaurant meals are a normal good, so when household incomes rise, consumers are willing and able to purchase more meals at every price. Income is a determinant of demand, so the demand curve shifts to the right. Producers' costs and technology are unchanged, so the supply curve does not move.
The equilibrium price of restaurant meals rises and the equilibrium quantity increases.
Watch for: Many students shift supply right as well, because more meals end up being served after the change. That extra output is an increase in quantity supplied along an unchanged supply curve, pulled out by the higher price; nothing happened to restaurants' costs, technology, or number.
2. Health Study on Soda: demand shifts left
The study worsens consumer tastes and preferences for soda, which is a determinant of demand. Consumers now buy less soda at every price, so the demand curve shifts to the left. Nothing about the cost or technology of producing soda has changed, so the supply curve stays put.
The equilibrium price of soda falls and the equilibrium quantity decreases.
Watch for: A common wrong answer shifts supply left too, reasoning that bottlers will produce less soda after the study. They do sell less, but only because the price fell; that is a movement down along an unchanged supply curve, since no input price, tax, or technology changed for producers.
3. Solar Panel Breakthrough: supply shifts right
Improved technology lowers the per-unit cost of production, which is a determinant of supply. Producers are now willing and able to offer more panels at every price, so the supply curve shifts to the right. Consumer incomes, tastes, and the prices of related goods are unchanged, so the demand curve does not move.
The equilibrium price of solar panels falls and the equilibrium quantity increases.
Watch for: Students very often shift demand right as well, saying that cheaper panels make people buy more. A fall in the good's own price never shifts its demand curve; it produces an increase in quantity demanded, a slide down the existing demand curve to the new intersection.
4. Wheat Price Shock: supply shifts left
Wheat is an input in producing bread, so a higher wheat price raises producers' per-unit costs. Input prices are a determinant of supply, so the supply curve shifts to the left as producers offer less bread at every price. Consumers' willingness and ability to buy bread at each price are unchanged, so the demand curve stays put.
The equilibrium price of bread rises and the equilibrium quantity decreases.
Watch for: Students frequently shift demand left as well, because bread gets more expensive and shoppers buy less of it. The higher bread price is the result of the supply shift, not a separate cause, so buyers simply move up along an unchanged demand curve.