Demand, Supply and Market Equilibrium 03A Appendix McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

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Presentation transcript:

Demand, Supply and Market Equilibrium 03A Appendix McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

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 LO6 3-2

Lettuce LO6 D1D1 S1S1 Q1Q1 P1P1 Quantity (pounds) Price (per pound) S2S2 Q2Q2 P2P

Exchange Rates Exchange rates – the price of one country’s currency in terms of another country’s currency Currency appreciation Currency depreciation LO6 3-4

Exchange Rates LO6 D 1 S1S1 Q1Q1 $1.25 Quantity of euros Dollar price of 1 euro D 2 0 $1.50 Q2Q2 3-5

Pink Salmon Supply shifts right for pink salmon New technology New fishers enter the industry Demand shifts left for pink salmon Increases in consumer’s income Reductions in the price of substitutes LO6 3-6

Pink Salmon LO6 D1D1 S1S1 Q1Q1 P1P1 Quantity (in pounds) Price (per pound) S2S2 D2D2 P2P2 Q2Q

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 LO6 3-8

Gasoline LO6 D2D2 S2S2 Q1Q1 P2P2 Quantity (in gallons) Price (per gallon) S1S1 D1D1 P1P1 Q2Q

Sushi Supply shifts right Increase in the number of sushi bars Demand shifts right Consumers’ tastes for sushi increases LO6 3-10

Sushi LO6 D2D2 S2S2 Q1Q1 Quantity (pounds) Price (per pound) S1S1 D1D1 P1P1 Q2Q

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 LO6 3-12

Preset Prices LO6 D S P1P1 P2P2 Q1Q1 Q2Q2 0 P Figure Skating Quantity (tickets) Price (per ticket) D S P1P1 P2P2 Q1Q1 Q2Q2 0 P Curling Quantity (tickets) Price (per ticket) ab Shortage a b Surplus 3-13