Market-Clearing Price/ Equilibrium Name ______Date _____ Hour ____
Please use the graph below to answer the following questions.
1) Label the equilibrium or market-clearing price on the graph. 2) What is the equilibrium price ______quantity ______
For each of the following graphs, draw in the new curve and determine what happens to the equilibrium price and quantity? Will they increase or decrease? Try to imagine a scenario or real-life example where this might happen.
3) Increase in Demand 4) Decrease in Demand
EQ price ____ EQ price _____ EQ quantity ___ EQ quantity ____ Example: Example: 4) Increase in Supply 5) Decrease in Supply
EQ price ____ EQ price _____ EQ quantity ___ EQ quantity ____ Example: Example:
For the following examples draw your own graphs describing the situation. Make certain to label everything! Also figure out what might happen to the new EQ price and quantity. (HINT- in some situations, you might not be able to determine an exact answer for the new EQ price and quantity.)
6) Increase in Supply and Demand 7) Decrease in Supply and Demand
EQ price ____ EQ quantity _____ EQ price _____ EQ quantity __
8) Increase in Supply and Decrease in Demand
EQ price ____ EQ quantity ____
9) Decrease in Supply and Increase in Demand
EQ price _____ EQ quantity ______It is very difficult to set prices at equilibrium or market-clearing level in the real world. Use the following graph to predict what will happen.
10) If the price is above equilibrium level- say $10 – what would happen? Which is bigger- what producers are willing and able to supply or what consumers are willing and able to purchase? (HINT- read the graph) At a price of $10, quantity supplied is ______quantity demanded is ______
Which is larger? What is this called in economics? ______
Give an example where you might see this in real life:
11) If the price is below equilibrium level – say $2- what would happen? Which is bigger- what producers are willing and able to supply or what consumers are willing and able to purchase? (HINT- read the graph) At a price of $2, quantity supplied is ______quantity demanded is ______
Which is larger? What is this called in economics? ______
Give an example where you might see this in real life:
12) In which part of the graph do you think you would be more likely to see a black-market or illegal activity? Why? What happened in the market for Beef?
13) Draw a simple demand and supply graph for the Fast Food Market in the space below. Make sure to label everything!
14) In the market for Fast Food, our evidence leads us to conclude that there was a decrease in the number of consumers due to the popularity of quick- casual restaurants, concerns of nutritional content of the food, and rumors of sanitation problems within the industry. Show what this would look like on your graph.
15) How have Fast Food producers responded to this potential loss of customers?
16) In addition, this same evidence states that the Fast Food chain’s like McDonald’s have developed special chicken with larger amounts of white meat, used government financing to open more stores, and trained their managers at places like McDonald’s University. Illustrate what this looks like on the above graph.
17) What do you predict to be the future of the market for Fast Food?