A.P. ECONOMICS
MR. BALLINGALL
ASSIGNMENT #4 – SUPPLY AND DEMAND
1. Draw two Supply and Demand graphs: one representing an increase in Demand, which you should
label as “Graph 1,” and a second graph representing a decrease in Demand, which you should label
as “Graph 2.”
For each of the following, answer two questions: (1) What effect will each of the following have on
the demand for small automobiles such as the Fiat 500 and the Mini-Cooper? (2) Which graph
would you use to show that change in demand, Graph #1 or Graph #2?
a.
b.
c.
d.
Small automobiles become more fashionable.
The price of large automobiles increases.
Income increases and automobiles are a normal good.
The price of gasoline substantially drops.
2. Draw 2 more Supply and Demand graphs: one representing an increase in Supply, which you should
label as “Graph 3,” and a second graph representing a decrease in Supply, which you should label
as “Graph 4.”
For each of the following, answer two questions: (1) What effect will each of the following have on
the supply of automobile tires? (2) Which graph would you use to show that change in supply,
Graph #3 or Graph #4?
a.
b.
c.
d.
A technological advance in the method of producing tires.
A decline in the number of firms in the tire industry.
An increase in the price of rubber used in the production of tires.
The imposition of a $5 per tire tax on each auto tire produced and sold.
3. There are 4 “double shifts” of supply and demand listed below. For each, draw the Supply and
Demand graph which shows the effects of the double shifts on equilibrium price and quantity. In
addition, for each part, WRITE OUT the effects on price and quantity.
a. On a hot day, both the demand for lemonade and the supply of lemonade increase.
b. On a cold day, both the demand for ice cream and the supply of ice cream decrease.
c. When Hawaii’s Mt. Kilauea erupts violently, the demand on the part of tourists for sightseeing
flights increases but the supply of pilots willing to provide these dangerous flights decreases.
d. In a hot area of Arizona where they generate a lot of their energy with wind turbines, the
demand electricity falls on windy days as people switch off their air conditioners and enjoy the
breeze. But at the same time, the amount of electricity supplied increases as the wind turbines
spin faster.