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SUPPLY, DEMAND AND MARKET PRICE
A. Graphing Demand and Supply Curves
1. On the graph below, plot the supply and demand curves for barrels of corn based on the
following data: (6 marks)
Price per barrel
.50
.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
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Quantity Demanded
(number of barrels)
425
350
295
250
215
170
115
70
45
Quantity Supplied
(number of barrels)
25
80
135
175
215
240
275
310
325
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2. a. What would the market price be at the equilibrium point? (1 mark)
_____________________________________________________________________
b. How many units would be sold at that point? (1 mark)
_____________________________________________________________________
c. What would happen if the price were below this point? (1 mark)
_____________________________________________________________________
_____________________________________________________________________
d. What would happen if the price were above this point? (1 mark)
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3. What effect would each of the following hypothetical events have upon the supply and/or
demand curves? (4 marks – 1 mark each)
a. Last week, Health and Welfare Canada announced that eating corn substantially
increases life expectancy.
_____________________________________________________________________
_____________________________________________________________________
b. Suppose that Health and Welfare Canada had announced that eating products
containing corn would make your hair fall out.
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_____________________________________________________________________
c. A strange blight ruined a substantial portion of the nation's corn crop.
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_____________________________________________________________________
d. An announcement from Dieters International stating that eating popcorn contributes to
weight loss.
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B. Changes in Demand and Supply
The following are factors that affect the price of a product. Indicate whether the factor
influences supply or demand, and whether it tends to increase or decrease the price of goods
and services. (16 marks – 1 mark per blank)
EVENT
EFFECT ON SUPPLY AND
DEMAND
EFFECT ON PRICE
1. Cost of obtaining raw
materials increases.
2. Product is a fad that loses
favour with consumers.
3. Minimum wage rate is
increased.
4. Advertising
campaign
showing the effects of
smoking is successful.
5. Personal income tax rate
is decreased.
6. Government
subsidies
increase for farmers.
7. Studies show an increase
in students' marks with an
increase
in
milk
consumption.
8. New technology lowers
production costs.
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C. Explaining Why The Price of a Product Varies at Different Times and Places
Using the knowledge you have of supply and demand, explain the difference in price in each of
the following situations. (5 marks – 1 mark each)
1. Strawberries in January are more expensive than strawberries in July.
_______________________________________________________________________
_______________________________________________________________________
2. Today's newspaper is more expensive than yesterday's newspaper
_______________________________________________________________________
_______________________________________________________________________
3. A can of pop at a beachfront swimming area is more expensive than it is in the local
supermarket.
_______________________________________________________________________
_______________________________________________________________________
4. A diamond necklace is more expensive than a rhinestone (glass imitation) necklace.
_______________________________________________________________________
_______________________________________________________________________
5. Summer clothing on the store rack in May is more expensive than it is in September.
_______________________________________________________________________
_______________________________________________________________________
Check over
your work
carefully before
handing it in!
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