Chapter 3A
Additional Examples of Supply and
Demand
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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
LO7
3A-2
Lettuce
S2
Price (per pound)
S1
P2
P1
D1
0
LO7
Q2
Q1
Quantity (pounds)
3A-3
Exchange Rates
• Exchange rates are the price of one country’s
currency in terms of another country’s
currency
• Currency appreciation
• Currency depreciation
LO7
3A-4
Exchange Rates
Dollar price of 1 euro
S1
$1.50
$1.25
D2
D1
0
Q1 Q 2
Quantity of euros
LO7
3A-5
Pink Salmon
• Supply shifts right for pink salmon
• New technology
• New fishers enter the industry
• Demand shifts left for pink salmon
• Increases in consumers’ income
• Reductions in the price of substitutes
LO7
3A-6
Pink Salmon
S1
Price (per pound)
S2
P1
P2
D2
0
Q1
D1
Q2
Quantity (in pounds)
LO7
3A-7
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
LO7
3A-8
Gasoline
Price (per gallon)
S2
S1
P2
P1
D2
D1
0
Q1 Q 2
Quantity (in gallons)
LO7
3A-9
Sushi
• Supply shifts right
• Increase in the number of sushi bars
• Demand shifts right
• Consumers’ tastes for sushi increases
LO7
3A-10
Sushi
S1
Price (per pound)
S2
P1
D2
D1
0
Q1
Q2
Quantity (pounds)
LO7
3A-11
Land in San Francisco
• Vertical supply curve
• Quantity supplied fixed and unresponsive to
price changes
• Demand increase causes price to rise but
quantity stays the same
• Demand decrease causes price to fall but
quantity stays the same
• Explains high real estate prices in cities
LO7
3A-12
Land in San Francisco
Price (per acre)
S1
P2
P1
D2
D1
0
Q0
Quantity of land (acres)
LO7
3A-13
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
LO7
3A-14
Preset Prices
P
S
Price (per ticket)
Price (per ticket)
P
P2
b
P1
0
a
Shortage
D
Q1
Q2
Figure Skating
Quantity (tickets)
LO7
S
Surplus
P2
a
b
P1
D
0
Q2
Q1
Curling
Quantity (tickets)
3A-15