ECNS 105
Problem Set 3
Supply and Demand
Name _________________________
1. Paterson Enterprises is an alternative fossil fuel company that manufactures solar
panels for sale in Bozeman. Currently, the market for solar panels in Bozeman is
captured in the Supply and Demand table below.
Market for Solar Panels
QD
(solar panels/month)
10
9
8
7
6
5
4
3
2
1
0
P ($/solar panel)
0
10
20
30
40
50
60
70
80
90
100
QS (solar panels/month)
0
1
2
3
4
5
6
7
8
9
10
A. Using the Supply and Demand table above sketch the supply and demand curves
for this market. Remember to label this graph appropriately.
B. What is the equilibrium price in the market?
C. On the graph above, label the equilibrium price with P*
D. What is the equilibrium quantity in the market?
E. On the graph above, label the equilibrium quantity with Q*
F. Suppose the Legislature of Montana levies a tax on silicon, a production input for
solar panels. As a result, Bridgeman Resources, Inc., the supplier of silicon to
Paterson Enterprises, charges more for silicon. What would be a possible new
equilibrium price and quantity in the market for solar panels?
a. $80.00, 6
b. $80.00, 3
c. $50.00, 8
d. $50.00, 5
G. Suppose Bush Utilities triples the price of natural gas for consumers in Bozeman.
As a result, the quantity of natural gas demanded falls. In the market for solar
panels, what would be a possible new equilibrium price and quantity? (Hint:
focus on the demand curve in the solar panel market)
a. $20.00, 2
b. $70.00, 1
c. $20.00, 8
d. $70.00, 8
H. Just recently the market for solar panels experienced an increase in the demand
of solar panels. However, Paterson Enterprises did not increase the quantity of
solar panels supplied to the Bozeman market. As a result, the market is currently
experiencing a:
a. Market Surplus
b. Consumer Surplus
c. Market Shortage
d. Producer Surplus
2. An increase in demand is:
a. a movement downward along the existing demand curve
b. a movement upward along the existing demand curve
c. a shift of the demand curve to the left
d. a shift of the demand curve to the right
3. A decrease in supply is:
a. a movement downward along the existing supply curve
b. a movement upward along the existing supply curve
c. a shift of the supply curve to the left
d. a shift of the supply curve to the right
4. A decrease in quantity demanded is:
a. a movement downward along the existing demand curve
b. a movement upward along the existing demand curve
c. a shift of the demand curve to the left
d. a shift of the demand curve to the right
5. An increase in supply is:
a. a movement downward along the existing supply curve
b. a movement upward along the existing supply curve
c. a shift of the supply curve to the left
d. a shift of the supply curve to the right
6. A decrease in quantity supplied is:
a. a movement downward along the existing supply curve
b. a movement upward along the existing supply curve
c. a shift of the supply curve to the left
d. a shift of the supply curve to the right
7. An decrease in demand is:
a. a movement downward along the existing demand curve
b. a movement upward along the existing demand curve
c. a shift of the demand curve to the left
d. a shift of the demand curve to the right
8. An increase in quantity demanded is:
a. a movement downward along the existing demand curve
b. a movement upward along the existing demand curve
c. a shift of the demand curve to the left
d. a shift of the demand curve to the right
9. An increase in quantity supplied is:
a. a movement downward along the existing supply curve
b. a movement upward along the existing supply curve
c. a shift of the supply curve to the left
d. a shift of the supply curve to the right
10. Max is the owner of Schneider Sandwich shop, which is located in the Bozeman area.
Schneider Sandwich is one of several competing shops in the market. Currently, the
market for sandwiches is in equilibrium. Sketch initial supply and demand curves for
this market and mark the equilibrium price and quantity as P* and Q* respectively.
Price
Sandwich Market
Quantity
A. The sandwich market you drew above captured the summer time sandwich
market. Now that the fall semester has begun at Montana State, the number of
consumers in the Bozeman area has increased. From the initial equilibrium,
sketch on the graph what would happen in this market now that students
returned to the Bozeman area. Label the new equilibrium price PA and the new
equilibrium quantity QA.
B. Dylan, one of Max’s competitors, decides to open Dylan’s Sub Shop in downtown
Bozeman. From the initial equilibrium, sketch on the graph what would happen
in this market now that Dylan opened his sub shop. Label the new equilibrium
price PB and the new equilibrium quantity QB.