Appendix C
Answer the following questions.
1. If the price of a good increases, what happens to demand?
As the price of a good increases the demand of said good decreases.
2. If the price of a good decreases, what happens to supply?
If the price of a good decreases, supplies of the good decrease.
3. Does a change in price create curve shifts? Explain.
A change in price of the good itself will lead to a movement along its demand curve; it will
not cause a curve shift. Non-price factors affecting supply cause a shift in the demand
curve.
ECO 205
Complete the following matrix. An example is provided.
Event
Market affected by
event
Shift in supply,
demand, or both.
Explain your answer.
Change in equilibrium
Frozen orange crops in
California
Orange juice
Supply (left)—Not as
many available oranges
to offer consumers.
Price will increase and
quantity will decrease.
Hurricanes in the Gulf
Coast
Gulf Coast tourism
Prices will decrease and
the number of tourists
will decrease.
Price of hot dogs increases
Hamburger
Price of sugar increases
Candy
New auto company opens
in Detroit
Automobile
War in Middle East
Gasoline
Movie theaters increase
admission prices
Video rentals
Demand (left) – People
are less willing to visit
an area ravished by a
storm
Demand (right) –
People will switch from
hot dogs to hamburger
because of the price
increase of hot dogs
Demand (left) – The
increase in sugar prices
will cause an increase
in candy prices, and
demand will decrease.
Supply (right) – More
cars will be produced
and available to
consumers.
Supply (left) – Not as
much oil will be
exported from the
Middle East during war.
Demand (right) –
People will forgo theatre
attendance for renting.
Very trendy designer
handbag manufacturer
enters the market
Hand bags
Cost of cotton decreases
Textiles
Tennis racquets decrease
in price
Tennis balls
Technology improves
efficiency in pasta
manufacturing
Pasta
Demand (left) – People
will want the trendy bag
over the other
handbags on the
market and demand for
other handbags will
decrease.
Supply (right) – More
textiles will be produced
when the price of the
raw material decreases.
Demand (right) – More
people will buy racquets
and will need tennis
balls to use with their
racquets
Supply (right) – More
pasta will be available
as companies can
produce more.
Price of hamburger will
increase and quantity
will decrease.
Quantity will increase,
forcing candy producers
to lower prices.
Price of autos will
decrease and quantity of
autos on the market will
increase.
Price will increase and
quantity will decrease
The price of video
rentals will increase
rental companies cope
with demand increases.
The price of the nontrendy handbags will
decrease and quantities
will increase.
The price will decrease
and quantity will
increase.
The price will increase
as demand increases.
Price will decrease, as
quantity will increase.
ECO 205