HW Assignment 2 Supply and Demand (MLO 4, 5 and 6)

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

points.    

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.             

     Demand                                                              

  P                       Q

  $1.25               1 

  $100                2 

  $0.75               3 

  $0.50               4 

  $0.25               5 

Supply

P                   Q 

$1.25            8 

$1.00            7 

$0.75            5 

$0.50            3 

$0.25            1   

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).