Equilibrium Price and Equilibrium Quantity
Part A
Figure 7.1 below shows the demand for Greebes and the supply of Greebes. Plot these data on the
axes in Figure 7.2. Label the demand curve 0 and label the supply curve S. Then answer the questions
that follow. Fill in the answer blanks, or underline the correct answer in parentheses.
]I Figure 7.1
,
Demand for and Supply of Greebes
Price
($ per Greebe)
$.15
.20
.25
.30
.35
:lfa
LJ3..,
Quantity Demanded
(millions of Greebes)
Quantity Supplied
(millions of Greebes)
300
250
200
150
100
100
150
200
250
300
Figure 7.2
Demand for and Supply of Greebes
.55 ,..----r----,...----,..----,r-----..,..--...,.....-~-__,
.50 +----+---+----+-------if---+-----t----+-----t
~ .45
ttl .40
+----+----+----+---+----+----+----+------i
a: .35 +----+----+----+----I--+-----t----+-----t
CJ
a: .30
~ .25
w .20 -t-----+----+-----+--~I___--+---........----+-----I
(.)
a: .15
a. .10+----+----4----+----1--+----+---4----1
.05 .......----+----+----+-~I-----+---........----+-----I
0-----'--.........----------------.-.--.........----'
50 100 150 200 250 300 350 400
QUANTITY (millions of Greebes)
1. Under these conditions, competitive market forces would tend to establish an equilibrium price of
_ _ _ _ per Greebe and an equilibrium quantity of
million Greebes.
2. If the price currently prevailing in the market is $0.30 per Greebe, buyers would want to buy
_ _ _ _ million Greebes and sellers \vould \vant to sell
million Greebes. Under these
conditions, there would be a (shortage / surplus) of
million Greebes. COlnpetitive market
forces would tend to cause the price to (increase / decrease) to a price of
per Greebe.
At this ne\v price, buyers \vould now \vant to buy
nlillion Greebes, and sellers now want
to sell
nlillion Greebes. Because of this change in (price I underlying conditions),
Adapted from Phillip Saunders, Introduction to A'1icroeconorllics: Student ~Vorkbook, 18th cd. (Bloomington, Ind., 1998).
Copyright © 1998 Phillip Saunders. All rights reserved.
Advanced Placement Economics Macroeconomics: Student Activities
'Q
National Council on Economic Education»
N~wYork,
N.Y.
27
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the (tlenlt1lld / quantity demanded) changed by
(supply / (.JlUlfltity supplied) changed by
million Greebes, and the
million Greebes.
3. If the price currently prevailing in the market is $0.20 per Greebe, buyers would want to buy
_ _ _ _ million Greebes, and sellers \vould \vant to sell
million Greebes. Under these
conditions, there \vould be a (shortage / surplus) of
million Greebes. Competitive market
forces \vould tend to cause the price to (increase / decrease) to a price of
per Greebe.
At this ne\v price, buyers \votl1d now want to buy
million Greebes, and sellers no\v
tnillion Greebes. Because of this change in (p rice / underlying conditions),
\vant to sell
the (denland / t.]uantity defnanded) c~anged by
million Greebes, and the
(supply / CJuantity supplied) changed by
nlillion Greebes.
4. Now, suppose a Inysterious blight causes the supply schedule for Greebes to change to the
following:
.".J;)
~tJi3
Figure 7.3
New Supply of Greebes
Price
($ per Greebe)
Quantity Supplied
(millions of Greebes)
50
100
150
200
$.20
.25
.30
.35
Plot the new supply schedule on the (L~es in Figure 7.2 and label it 51. Label the ne\v equilibrium
Et . Under these conditions, competitive market forces would tend to establish an equilibrium price of
_ _ _ _ per Grcebe and an equilibrium quantity of
million Greebes.
.
Conlpared with the equilibrium price in Question 1, \ve say that because of this change in
(price / underlying conditions), the (supply / quantity supplied) changed; and both the equilibrium
price and the equilibrium quantity changed. The equilibrium price (increased / decreased), and the
equilibrium quantity (increased / decreased).
5. No\v, \vith the supply schedule at 51' suppose h.lrther that a sharp drop in people's incomes as the
result of a prolonged recession causes the denland schedule to change to the follo\ving:
'::j-/)
,1\1
Figure 7.4
l're~v Demand for Greebes
Price
($ per Greebe)
$.15
.20
.25
.30
Quantity Demanded
(millions of Greebes)
200
150
100
50
Plot the nevI JeIlland schedule on the axes in Figure 7.2 and label it 0 1. Label the nc\v equilibriurn
E2' lJnder thcs~ conditions, \vith the supply sch~dllic at 51 ) cornpetitivc market forces would tend to
cstabli~h an cquilibriull\ price of _
per Grcebe and an equilibriuln quantity of
_____ Inillio[1 (Jreebes. (~()111pared \vith the equilibriuITl price in Qu~stion tl, because of this
change in (prier' / linderlying conditiolls), the (dernalld / ljUtlfltity denulfldcll) changed. 'The
equilibriuln price (iJlCrl'dSed / d<:crt:tlSed) and the equilibriurrl quantity (incretlsed / dccreast:d).