 |  Principles of Microeconomics, 1st Canadian Edition Robert H. Frank,
Cornell University
Ben S. Bernanke,
Princeton University
Lars Osberg,
Dalhousie University
Melvin Cross,
Dalhousie University
Brian MacLean,
Laurentian University
Supply and Demand: An Introduction
Graphing ExercisesExtending the Text Economic Naturalist 4.1 asks why Ph.D. Dissertations and book manuscripts go through so many more revisions today than in the 1970's. Using a supply and demand framework as a way to look at the question, the explanation is straightforward. The cost of doing revisions has dropped precipitously with new technology, moving the supply curve to the right. As writers and editors have adjusted to the change a new equilibrium number of revisions has emerged. |
| | 1. | Using this interactive model, shift the supply curve to the right (as in Figure 4.10 in your text). To shift the curve, simply drag it to the new location. Once the curve is in place, click on the New Equilibrium button and observe the changes. What is the effect on the quantity of revisions? What is the effect on the price of revisions?
See our suggested answer. |
| On Your Own: How do supply and demand affect price and quantity? As an exploration of Supply and Demand, let's look at the market for bagels on the local "College Avenue"—you know the place, it's the concentration of shops catering to the local university. At the beginning of our exercise the market is at rest, or equilibrium, with bagels selling for $1.29 each and 843 being sold in an average week.
From this starting point your task is to predict which way price and quantity will move as conditions on College Avenue change. Use the graph to help you work through the various cases. |
| | 2. | What would be the likely effect on the equilibrium price and quantity of bagels if a new bagel shop opened up on College Avenue?
See our suggested answer. |
| | 3. | Suppose enrollment in the university rises by 10%. What would be the short-term result in the market for bagels?
See our suggested answer. |
| | 4. | Suppose BOTH occurrences above take place—enrollment rises, pushing up both price and quantity and, as a result, someone opens a new bagel shop on College Avenue. What would be the likely result in the market for bagels?
See our suggested answer. |
| Question to Think About... - Think about your own behaviour, and the behaviour of those around you.
- What is likely to happen to the number of meals served in the campus dining facility if tuition rises?
- How will student's spring break plans change if an airline announces a dramatic fare reduction to the Bahamas?
- What effect will this have on the price of hotel rooms in the Bahamas?
- In Florida?
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2003 McGraw-Hill Higher Education