Practice Problems for Demand and Supply
If you decide to put one on the board then please clearly indicate the number and part and put up
all relevant information.
1.) ( Millions lbs. )
Given: P ($) Qd Qs
Price
10
Problem 1. a
8.5
A. Construct graph of D & S.
7.5
Su
p
Do the following:
pl
y
4 35 15
5 30 20
6 25 25
7 20 30
8 15 35
9 10 40
6.5
5.5
em
D
d
an
4.5
3.5
0
5
10
15
20
25
30
35
40
Quantity
Su
pp
ly
B.) Supposing that Qd increased by 20 million lbs. at all prices (i.e. parallel shift),
Construct change on your graph and
show new equilibrium.
1. b
10
8.5
New Equilibrium (35, 8)
6.5
5.5
em
d
an
4.5
3.5
d
lD
n
ma
na
igi
De
Or
w
Ne
Price
7.5
0
10
20
30
Quantity
40
50
65
igi
na
Su
pp
ly
lS
up
ply
1. c
10
C. Suppose that Qs increases by 20
million lbs. at all prices instead of a
change in Qd as in B above; Construct
change ( start with graph from part A and
not part B).
Ne
w
Or
8.5
Price
7.5
6.5
an
m
De
5.5
d
4.5
New Equilibrium (35,4)
3.5
0
10
20
30
40
Quantity
D. Suppose instead of B or C, that Qs falls relative to values in table by 20 million lbs.
at all P > 5 And at P ≤ 5 Qs = 0
Show changes.(start with graph from part A and not part B).
Or
igi
Su
Ne
w
8.5
7.5
Price
na
pp
ly
lS
up
ply
1. d
10
New Equilibrium (15,8)
6.5
nd
ma
De
5.5
4.5
3.5
0
10
20
30
Quantity
40
50
65
50
65
2.) In the above figure, in order for price to remain constant, but quantity to increase the
A) supply and demand curves both would have to shift leftward.
B) supply curve would have to shift leftward and the demand curve would have to shift
rightward.
C) supply curve would have to shift rightward and the demand curve would have to shift
leftward.
D) supply and demand curves both would have to shift rightward .
Clearly both supply and demand would have to increase for Q to rise and they would have to do
so by the same amounts for P to remain constant. D is the best response in this case.
3.) Let Qd stand for the quantity demanded, Qs stand for the quantity supplied, and P stand
for price.
If Qd = 20 – 2P and Qs = 5 + 3P, solve for the equilibrium quantity and price.
The easiest way is to find the values at equilibrium, at which Qd = Qs.
Since at this point Price is the same set the expressions equal to each other and solve:
20 – 2P = 5 + 3P
15 = 5P
3 = P and then substitute 3 for P in either of the above to find Q
20 - 2(3) = Q
14 = Q
4.) Given P = 1/50 Q + 2 and P = -1/50 Q + 6
What is Ep and Eq ?
The easiest way is to find the values at equilibrium, at which Qd = Qs.
Since at this point Price is the same set the expressions equal to each other and solve:
1/50 Q + 2 = -1/50 Q + 6 thus
2/50 Q = 4
Q = 100 and then substitute 100 back into either to find P
P = 1/50(100) + 2 = 4
What effect will P = 1/50 Q + 4 have? i.e.: This is a movement in what ? What is new Ep and Eq?
This is a shift in S and in fact is a decrease in Supply. Thus price should rise and quantity should
fall.
1/50 Q + 4 = -1/50 Q + 6
2/50 Q = 2
Q = 50 and then substitute 50 back into either to find P
P = 1/50 (50) + 4 = 5
What happens if Demand now moves to P = - 1/50 Q + 10 ?
This is an increase in Demand so Price should rise and quantity should rise.
1/50 Q + 4 = -1/50 Q + 10
2/50 Q = 6
Q = 150 and then substitute 150 back into either to find P
P = 1/50 (150) + 4 = 7
5.) Given P = Q/4 - 25 and P = - Q/2 + 125
Find mkt. P & Q.
The easiest way is to find the values at equilibrium, at which Qd = Qs.
Since at this point Price is the same set the expressions equal to each other and solve:
Q/4 - 25 = - Q/2 + 125
3Q/4 = 150
3Q = 600
Q = 200
now substitute 200 back into either expression and find P.
P = 200/4 - 25 = 50 - 25 = 25