Tutorial 3

1. The table sets out the demand and supply schedule for chips.

a)Draw a graph of market for chips and mark in the equilibrium price
Price Quantity Quantity and quantity.
(cents demanded supplied b)Suppose that a bag of chip is 70 cents a unit. Describe the situation
per unit) (mil) (mil) in the market and explain how the price adjusts.
c)Suppose the new dip comes on to the market, which is very popular
50 160 130 and the demand for chips increases by 30 million bags per week.
i)Has there been a shift of or a movement along the supply curve of
60 150 140 pencils?
ii) Has there been a shift of or a movement along the demand curve
70 140 150
for pencils?
iii) What are the new equilibrium price and equilibrium quantity of
80 130 160
chips?
90 120 170 d) In problem c), suppose that bad weather destroys several potato
farms with the result that the supply of chips decreases by 40 million
100 110 180 bags a week at the same time as the dip comes on to the market.
What are the new equilibrium price and quantity of chips?

2. For each question, draw a market in equilibrium, labeling the initial equilibrium price and
equilibrium quantity. Then shift the appropriate curve and label the new equilibrium price and
equilibrium quantity. Next, describe what happened.
a) Subsidies to producers of this good increase:
b) What will happen if there is an increase in the number of buyers of this good at the same time that
subsidies to producers of this good decrease, and demand and supply shift by equal amounts?
c) What will happen if there is an increase in income and this is an inferior good and, at the same
time, subsidies to producers rise, and demand and supply shift by equal amounts?

3. Price is $10, quantity supplied is 50 units, and quantity demanded is 100 units. For every
$1 rise in price, quantity supplied rises by 5 units and quantity demanded falls by 5 units.
What is the equilibrium price and quantity?

4. Below are the demand/supply schedules for tennis Nika shoes

PRICE PER QUANTITY QUANTITY a) What is the equilibrium price and quantity of
PAIR DEMAN SUPPLI Nika shoes?
(RM) DED ED b) Name any three general factors that can
105 25,000 100,000 change the demand of Nika shoes.
90 30,000 80,000 c) Name any three general factors that can
75 40,000 60,000 change the supply of Nika shoes.
60 50,000 50,000
45 60,000 40,000
30 80,000 30,000
15 100,000 20,000