Question 1. Draw a demand curve with an equilibrium price and quantity, show what happens on your diagram when each of the following events occurs. Explain whether each of the following events represents a (i) shift of the demand curve or (ii) a movement along the demand curve.
(a) A store owner finds that customers are willing to pay more for umbrellas on rainy days
(b) When XYZ Telecom, a long-distance telephone service provider, offered reduced prices for its services on weekends, the volume of weekend calling increased sharply.
Question 2. The following table represents the demand and supply for orchids (a type of flower). Plot the curves on the diagram below
Price Quantity demanded Original Quantity Supplied New Quantity Supplied (Pounds/$) (thousands pounds)(thousands pounds)(thousands pounds)
a) Graph both the supply (S0) and the demand (D0) curves. What is the current equilibrium price and quantity?
b) Something has happen to the supply of orchids and the new supply curve is given above. Graph the new supply curve. Is there a temporary shortage or surplus before the market adjusts? What is the new equilibrium price and quantity?
c) Name all the factors that could shift the supply curve like it has?
Question 3. In the following situation, draw the market for wheat After each event described below, what will happen to the equilibrium price and quantity as a result? Draw a diagram and be sure to label everything.
(i) Due to good weather, 1997 was a very good year for Prairie wheat growers, who produced a bumper crop of wheat. At the same time, there is an announcement by the Canadian Health Organization saying that corn is bad for your...