AP MACROECONOMICS---Ippolito 2014
Name: ____________________
Supply & Demand Short Answer Problems

You are solving these problems in the SHORT RUN only (focus on the immediate effect)
1) Market for Sports Cars
∆ = Change
Market Equilibrium P=$80,000 Qty: 10,000
A. Draw the initial equilibrium (label all points & graph)
B. Modify your graph assuming Autoworkers negotiate a 10% pay increase
C. Circle which applies: ∆ in demand,
Which determinant of demand (TIPSEN) or
∆ in supply,
∆ in Qty demanded,
∆ in Qty supplied
determinant of supply (TINE-TP) changed? ________________
INPUT PRICES INCREASE
Market Equilibrium P=$100 Qty: 200,000
2) Market for Soda
A. Draw the initial equilibrium (label all points & graph)
B. Modify your graph assuming Bottled Water makers raise their price by 50 cents per bottle
C. Circle which applies: ∆ in demand,
Which determinant of demand (TIPSEN) or
∆ in supply,
∆ in Qty demanded,
∆ in Qty supplied
determinant of supply (TINE-TP) changed? ________________
PRICE OF SUBSTITUTE GOOD
3) Market for large SUV’s
Market Equilibrium P:$35,000 Qty 1,000,000
A. Draw the initial equilibrium (label all points & graph)
B. Modify your graph assuming Gasoline rises from $4 per gallon to $7 per gallon
C. Circle which applies: ∆ in demand,
Which determinant of demand (TIPSEN) or
∆ in supply,
∆ in Qty demanded,
∆ in Qty supplied
determinant of supply (TINE-TP) changed? ________________
PRICE OF COMPLEMENT GOOD
ACTUAL AP FORMAT QUESTION:
3) Assume that bread and butter are complementary goods. The government begins to subsidize the production of
wheat, which is an input into the production of bread.
A) For each of the following markets, draw correctly labeled supply and demand graphs and show the effect
of the subsidy on the equilibrium price and quantity in the short run.
i. The wheat market
ii. The bread market
iii. The butter market
What determinant of demand (TIPSEN) or determinant of supply (TINE-TP) changed in each graph?