ATGB2343 INTRODUCTION TO ECONOMICS

Tutorial: Topic 2 Market Demand and Supply

1. What effect will each of the following have upon the supply of television sets? Explain your reasoning in each case.

(a) An increase in the price of electronic equipment used in producing television sets.

Price of electronic equipment increase, quantity supplied decrease

-due to the production cost increase

(b) A decline in the number of firms producing television sets.

Number of firms decrease, quantity supplied decrease

-due to resources decrease

(c) A large new tariff on imported Japanese TV sets.

Taxes increase, quantity supplied decrease

-due to production cost increase

(d) A new inexpensive satellite dishes which make televisions more popular among consumers.

More popular, quantity supplied decrease

-due to increase of demand

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 ATGB2343 INTRODUCTION TO ECONOMICS

2. Using the schedules given, plot the demand curve and the supply curve on the graph. Label the axes and indicate
for each axis the units being used to measure price and quantity. Then answer the questions.

Quantities Quantities supplied

demanded
Price ($) (bushels of oats) Price (bushels of oats)
1.50 10,000 1.50 40,000
1.40 15,000 1.40 35,000
1.30 20,000 1.30 30,000
1.20 25,000 1.20 25,000
1.10 30,000 1.10 20,000
1.00 35,000 1.00 15,000

(a) Give the equilibrium price and quantity for oats.

P
1.6 Surplus
1.4
1.2
1
0.8
0.6
0.4
0.2
0
10000 15000 20000 25000 30000 35000 40000

Bushels of oats
Quantities demanded Quantities supplied

(b) Indicate the equilibrium price and quantity on the graph by drawing lines from the intersection of the supply
and demand curves to the price and quantity axes.

RM1.20

(c) If the government decided to support the price of oats at $1.40 per bushel, tell whether there would be a
surplus or shortage and how much it would be.

Surplus, 35000-15000=20000

(d) Demonstrate your answer to part (c) on your graph being sure to label the quantity you designated as the
shortage or surplus.

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 ATGB2343 INTRODUCTION TO ECONOMICS

3. In the space below, indicate the effect [increase (+) or decrease (-)] on equilibrium price (P) and equilibrium quantity
(Q) of each of these changes in demand and / or supply.

P Q
(a) Increase in demand, supply constant +
_________ +
_________
(b) Increase in supply, demand constant -
_________ +
_________
(c) Decrease in demand, supply constant -
_________ +
_________
(d) Decrease in supply, demand constant +
_________ -
_________

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 ATGB2343 INTRODUCTION TO ECONOMICS

2. Using the schedules given, plot the demand curve and the supply curve on the graph. Label the axes and
indicate for each axis the units being used to measure price and quantity. Then answer the questions.

Quantities Quantities supplied

demanded
Price ($) (bushels of oats) Price (bushels of oats)
1.50 10,000 1.50 40,000
1.40 15,000 1.40 35,000
1.30 20,000 1.30 30,000
1.20 25,000 1.20 25,000
1.10 30,000 1.10 20,000
1.00 35,000 1.00 15,000

(e) Give the equilibrium price and quantity for oats.

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