Ch5 Practice

Ch5 Practice - Ch. 5 Practice 1. Use demand and supply...

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Ch. 5 Practice 1. Use demand and supply curves to help you determine the impact of the following events on the market for gasoline. a. Vast new oil reserves are discovered in Wyoming. This would increase supply, shifting the supply curve to the right. Simply locate the new point of intersection between the new supply curve and the demand curve. This illustrates the new equilibrium price and quantity. By comparing the old equilibrium with the new one, we can see that the price will fall (from P1 to P2) while the quantity traded will rise (from Q1 to Q2). b. The Oil Producing Exporting Countries (OPEC) decide to impose stricter production quotas upon themselves. This would decrease supply, shifting the supply curve to the left. Simply locate the new point of intersection between the new supply curve and the demand curve. This illustrates the new equilibrium price and quantity. By comparing the old equilibrium with the new one, we can see that the price will rise (from P1 to P2) while the quantity traded will fall (from Q1 to Q2)
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c. People begin to drive smaller more gas efficient cars. This would decrease demand, shifting the demand curve to the left. Simply locate the new point of intersection between the new demand curve and the supply curve. This illustrates the new equilibrium price and quantity. By comparing the old equilibrium with the new one, we can see that the price will fall (from P1 to P2) and the quantity traded will fall (from Q1 to Q2). d. Summer approaches and people begin driving more. This would increase demand, shifting the demand curve to the right. Simply locate the new point of intersection between the new demand curve and the supply curve. This illustrates the new equilibrium price and quantity. By comparing the old equilibrium with the new one, we can see that the price will rise (from P1 to P2) and the quantity traded will rise (from Q1 to Q2).
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2. Use demand and supply curves to help you determine the impact of the following events on the market for wheat in India. a. A drought wipes out most of the wheat crop.
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Ch5 Practice - Ch. 5 Practice 1. Use demand and supply...

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