Creating Graphs to Reach Equilibrium
Student Guide
Summary
In this assignment, you will create two graphs and answer questions about Bond's Gym, the business you are
supporting.
Assignment Instructions
1.
Gather materials and necessary information.
a) Ask your teacher which word processing software you will be using.
b) Keep your lesson and assignment open in case you need to review what you have learned.
2.
Read and follow each set of instructions carefully.
a) To create each graph, insert shapes and textboxes using your word processing software. To do this in
Microsoft Word®:
i) Click on the “Insert” tab
ii)
Click on “Shapes” in the “Illustrations” section, and select a line or arrow shape
iii) Use the mouse cursor to draw the line or arrow on the graph
b) If you are using different word processing software, be sure to ask your teacher if you aren’t sure how to
accomplish this.
c) Make sure you complete the questions on each page.
Section 1: Supply and Demand Curves
The owner of Bond's Gym has paid you to carry out a survey of potential customers. You asked 600 potential
customers what price they would be willing to pay to join the gym. Then, the owner provided you data about the
number of customers that can be admitted as members at each membership price.
This allowed you to create a combined supply and demand schedule for Bond's.
Supply and Demand Schedule
Membership Price
1.
Membership Applications
Memberships Available
$0
600
0
$15
450
100
$30
300
200
$45
150
300
$60
0
400
Using the data in the supply and demand schedule, create demand and supply curves for Bond's Gym on
the following graph. Be sure to use textboxes to label the supply curve as S and the demand curve as D. (10
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Student Guide (continued)
points)
2.
Is the demand curve shallow or steep? What does this mean about the elasticity of the demand for
memberships? (5 points)
It’s shallow. This means the elasticity of the demand for memberships is inelastic.
3.
Is the supply curve shallow or steep? What does this mean about the elasticity of supply for memberships?
(5 points)
Steep, meaning the elasticity of supply for memberships is elastic.
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Student Guide (continued)
Section 2: Equilibrium and Incentives
Now, you will graph a recommended course of action for Bond's Gym.
1.
Create a graph that demonstrates equilibrium and excess demand. Make sure your graph includes the
same supply and demand curves that you just created. In addition, label the point of equilibrium, draw a
line showing the current price at Bond's ($10), and label the excess demand on the graph. (10 points)
2.
Based upon the graph you created, what price should Bond's Gym charge for memberships in order to
reach equilibrium? (5 points)
To reach equilibrium, they should charge around 35$-40$
3.
If Bond's Gym raises prices to your recommended price, how will this affect demand for their product? (5
points)
It will affect it by decreasing the demand and raising prices. Although it will stay high enough in demand
for profit.
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