HW Assignment 2 - Supply and Demand (MLO 4, 5 and 6)
Answer the following questions with a graph and an analysis (or the causation) of the sequence of events of how
each shock impacts one of the determinants of supply or demand, then show how it shifts the supply or demand curve to
generate a new equilibrium price and the quantity. This should look similar to the causation that I show underneath the
graphs in my Demand, Supply and Equilibrium power point lectures. Make sure to answer each question with its own
separate graph that includes both supply and demand with its initial equilibrium price and quantity (labeled as P1 and Q1)
and then the shift in either the supply or demand curve (not both) to find the new equilibrium price and quantity (labeled
as P2 and Q2) to answer the question. The graphs are worth 1/2 the points and the analysis or causation is worth 1/2 the
1) Using the information bellow, Draw the Demand and Supply Curves for Candy Bars and find the equilibrium price and
quantity. Hint: Demand goes down to the ground and Supply goes up to the sky.
Now show what happens to the equilibrium price and quantity due to the following events or shocks. Each shock will
impact either one of the 5 determinants of Demand and shift the demand curve or it will impact one of the 6 determinants
of Supply and shift the supply curve. Hint: Increases in supply or demand shift the curve to the right and decreases in
supply or demand shift the curve to the left. (Less:left). Make sure you do a separate graph for each event/question
starting with the initial equilibrium and then showing the shift in either the supply and demand curve. Then make sure that
you show the new equilibrium price and quantity. You can leave it in the general form and use P1 and Q1 for your initial
equilibrium price and quantity and P2 and Q2 for the new price and quantity. Similar to the graphs in the power point
lectures. If it helps you to make up a new numerical price and quantity that is fine. (Please note: this is similar to the
questions on the Supply and Demand exam.)
2) candy stops heart disease
3) the price of chocolate increases
4) Tech. advances in how candy is made
5) we tax candy.
Again, make sure to draw a graph for each question that starts with supply and demand and the initial equilibrium price
(P1) and quantity (Q1).
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