1. (1) Shortage P QD = 15 – 2 P S QS = -25 + 8 P QS = -25 + 8 (3.5) = 3

2. (2) Surplus P QD = 15 – 2 P S QS = -25 + 8 P QD= 15 - 2 (5) = 5

3. d. Market changes Process: Start with initial equilibrium
Does the event affect supply or demand?
Which direction is that effect in? (Increase or decrease)
Show graphically
Start explicitly what happens to P and Q

4. (1) Changes in demand

5. (a) Increase in demand P S Ex. – HP reduces price of printers
D0 -> D1 => increase in demand P1
D => P Q P0 D0 D1 Q0 Q1 QD

6. (b) Decrease in demand P S Ex. – Decline in population in Detroit
D0 -> D2 => decrease in demand P0 P2
D => P Q D2 D0 Q2 Q0 QD

7. (2) Changes in supply

8. (a) Increase in supply P S0 S1 Ex. - Uber
S0 -> S1 => increase in supply P0 P1
S => P Q D Q0 Q1 QD

9. (b) Decrease in supply P S2 S0 Ex. – Increase in wages
S0 -> S2 => decrease in supply P2 P0
S => P Q D Q2 Q0 QD

10. (3) Changes in demand and supply

11. Ex. – Boom in housing marketP S1 S0 P1
Ex. – Boom in housing market P0
EXC => D
=> P Q
EXP => S
=> P Q
=> P Q uncertain D0 D1 Q0 QD

12. Ex. – Crash in the stock marketP S0 S1
Ex. – Crash in the stock market P0
EXC => D
=> P Q
EXP => S
=> P Q P1
=> P Q uncertain D0 D1 Q0 QD

13. P S0 S1 P0 D
=> P Q S
=> P Q D1
=> Q P uncertain D0 Q0 Q1 QD

14. P S1 S0 P0 D
=> P Q S
=> P Q
=> Q P uncertain D0 D1 Q1 Q0 QD