ECON 101- Equilibrium Prices and Quantities

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Name: _______________________

Economics: __

CH 6

Equilibrium Prices and Quantities

NCEE STUDENT ACTIVITIES

Date: ______

A fundamental assumption of economics is that people behave rationally. Buyers and sellers, therefore, enter into exchange situations that they believe will be beneficial to them.

Equilibrium is the point at which the supply and demand curves cross; at this point, the quantity demanded and the quantity supplied are equal. The price indicated at that point is the price one sees in the market, and the quantity illustrates the amount produced.

FANTASTIC FLYING DISC EQUILIBRIUM Below is a table indicating the demand for and the supply of Flying Discs. Plot these data on the graph provided. Label the demand curve D, the supply curve S, and the equilibrium point E. Then answer the questions that follow by filling in the blanks or underlining the correct word in the parentheses.

Demand & Supply of Flying Discs Price $1.00 $2.00 $3.00 $4.00 $5.00

Quantity Demanded (millions) 300 250 200 150 100

Quantity Supplied (millions) 100 150 200 250 300

ANALYZING EQUILIBRIUM (I) 1. Under these conditions, competitive market forces will tend to establish an equilibrium price of $ __$3____ per Flying Disc and an equilibrium quantity of _200 m.___Flying Discs.

2. If the current prevailing price on the market is $4 per Flying Disc, buyers would want to purchase __150___ Flying Discs, and sellers would want to sell __250__Flying Discs.

3. Under these conditions, there would be a (shortage, surplus) of ___surplus____ Flying Discs.

4. Competitive market forces would tend to cause the price to (increase, decrease) to a price of $ _$3_____ per Flying Disc.

5. At this new price, buyers would now want to purchase ___200___ Flying Discs, and sellers would want to sell __200____ Flying Discs.

6. Because of this change in (price, underlying conditions), the (demand, quantity demanded) changed by _____50_____ Flying Discs.

7. If the currently prevailing price on the market is $2 per Flying Disc, buyers would want to purchase _250___ Flying Discs, and sellers would want to sell __150__ Flying Discs.

8. Under these conditions, there would be a (shortage, surplus) of _shortage__ Flying Discs.

Competitive market prices would tend to cause the price to (increase, decrease) to a price of $ __$3____ per Flying Disc.

9. At this new price, buyers would now want to purchase _200__ Flying Discs, and sellers would want to sell _200____ Flying Discs.

ANALYZING EQUILIBRIUM (II) Now suppose that an increase in the cost of plastic used to make Flying Discs causes the supply curve to change. Plot these new data on the same graph and label the curve S1. Label the new equilibrium E1.

Change in Supply of Flying Discs

Mr. Weaver’s Resources

www.HMHco.com

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Fall 2020

Name: _______________________

Economics: __

Date: ______

Price per Flying Disc

Quantity Supplied (in millions)

$2.00

50

$3.00

100

$4.00

150

$5.00

200

10. Under these conditions, competitive market forces would tend to establish an equilibrium price of $__3.50____ per Flying Disc and an equilibrium quantity __125__ of Flying Discs.

11. Compared to the equilibrium price in the first set of data, you could say that, because of this change in (price, underlying conditions), the (supply, quantity supplied) changed, and both the equilibrium price and the equilibrium quantity change. _______________________ ________________________ 12. The equilibrium price (increased, decreased), and the equilibrium quantity (increased, decreased). ____________________________ _________________________

ANALYZING EQUILIBRIUM (III) Now, with the supply schedule at S1, suppose that a national recession causes most people’s incomes to drop sharply. Thus, the demand schedule for Flying Discs changes. Plot these new data on the same graph and label the curve D1. Label the new equilibrium price E2.

Change in Demand for Flying Discs Price per Flying Disc

Quantity Demanded (in millions)

$1.00

200

$2.00

150

$3.00

100

$4.00

50

13. Under these conditions, with the supply schedule at S1, competitive market forces would tend to establish an equilibrium price of $___2.50__ per Flying Disc and an equilibrium quantity of __125___ Flying Discs.

14. Compared to the equilibrium price derived from the previous data, because of this change in (price, underlying conditions), the (demand, quantity demanded) changed. _________________________ ________________________________ 15. The equilibrium price (increased, decreased), and the equilibrium quantity (increased, decreased). ______________________

Mr. Weaver’s Resources

______________________

www.HMHco.com

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Fall 2020