2.2.5Practice_ Illustrating Supply and Demand

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Economics

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May 23, 2024

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Section 1: Creating a Supply and Demand Graph Complete items 1 through 3. Use the supply and demand schedules to build a graph using the graphing area below. Then answer the following questions. Feel free to return to the previous activities in the lesson if you need to review major concepts. 1. Artisan Bakery sells loaves of bread that it bakes fresh every day. Use the supply schedule to graph each point of the supply curve. Connect each point with a line to build a supply curve. Price of bread per loaf Quantity supplied $4.50 40 $5.00 50 $5.50 60 $6.00 75 $6.50 85 In which direction does the supply curve head? How does this show the law of supply? (1 point) The supply curve increases to the right. This shows the law of supply as the number of loaves produced increases with the price of bread. 2. Use the demand schedule to graph each point of the demand curve. Connect each point with a line to build a demand curve. Price of bread per loaf Quantity demanded $4.50 95 $5.00 75 $5.50 60 $6.00 50 $6.50 45 In which direction does the demand curve head? How does this show the law of demand? (1

point) The demand curve increases to the left and decreases to the right. This shows the law of demand because the number of loaves demanded increases as the price of bread decreases. 3. What is the equilibrium price of a loaf of bread? How can you tell this from the graph? (1 point) The equilibrium price of a loaf is $5.50. This is where the demand curve and supply curves intersect. Section 2: Applying Changes to a Supply and Demand Graph Complete items 4 through 9. Use the supply and demand schedules to build a graph in the graphing area below. Then answer the questions that follow. 4. A shortage of grain has caused a change in the bakery's supply schedule. Use the supply schedule to graph each point of the new supply curve. Connect each point with a line to build a supply curve. Price of bread per loaf Quantity supplied $4.50 30 $5.00 35 $5.50 40 $6.00 50 $6.50 60 Explain why the supply curve changed as compared to the previous graph. (1 point) The supply has been reduced, thus increasing the price for the same level of demand. 5. Customer demand for loaves of bread stays the same. Use the demand schedule to graph each point of the demand curve. Connect each point with a line to build a demand curve. Price of bread per loaf Quantity demanded $4.50 95 $5.00 75

$5.50 60 $6.00 50 $6.50 45 What is the new equilibrium price of a loaf of bread? (1 point) The new equilibrium price is $6.00. 6. In response to rising prices, the local government passes a law that says the price of a loaf of bread cannot be higher than $5.50. Add a horizontal line across the graph at that price and give it a label: price ceiling. At this lower price, how many loaves would the seller be willing to make? How many loaves would customers want to buy? (1 point) At the $5.50 price, the bakery would only be able to produce 40 loaves, but the customers wouldwant to purchase 60 loaves. 7. Does this new price set by the government result in a surplus or shortage of loaves of bread? (1 point) The new government price would result in a shortage of bread. 8. After a few months, the government repeals the price ceiling law and the bakery decides that it will no longer sell bread for less than $6.50 per loaf. Add a horizontal line across the graph at that price and give it a label: price floor. At this higher price, how many loaves would the bakery be willing to sell? How many loaves would customers want to buy? (1 point) At the $6.50 price, the bakery would be willing to sell 60 loaves, but the customers would onlywant to buy 45. 9. Does this new price set by the bakery result in a surplus or shortage of loaves of bread? (1 point) The new price would result in a surplus of loaves. Section 3: Applying Changes to a Supply and Demand Graph Complete items 10 through 13. Use the supply and demand schedules to build a graph using the graphing area below. Then answer the questions that follow. 10. Artisan Bakery also sells gallon containers of milk. Use the supply schedule to graph each point of the supply curve. Connect each point with a line to build a supply curve. Price of milk per gallon Quantity supplied $2.00 25

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$2.50 30 $3.00 40 $3.50 50 $4.00 55 Use the demand schedule to graph each point of the demand curve. Connect each point with a line to build a demand curve. Price of milk per gallon Quantity demanded $2.00 41 $2.50 40 $3.00 40 $3.50 39 $4.00 39 What is the equilibrium price for a gallon of milk? (0.25 point) The new equilibrium price is $3.00. 11. Compare the supply and demand graph you made for gallons of milk with the graph you made for loaves of bread in section 1. How do the supply curves in both graphs look? Are they similar or very different? (0.25 point) One of the curves are increasing right while the other decreases left. They are different but even when the price changes, the demand is the same. 12. Now examine the demand curves for both graphs. How do they compare? Are they similar or very different? (0.25 point) The slopes of the curves look different since the demand for the loaves of bread change while the milk stays the same and supply and price increase with eachother. 13. Based on your comparison, which product sold by Artisan Bakery has more elasticity in demand: milk or bread? How can you tell? (0.25 point) The bread has more elasticity in demand because it ranged from 45-95 loaves with only a $2 change. The milk was inelastic because in ranged from only 39-41 gallons even with the increase in price.

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