This worksheet provides a comprehensive review of demand and supply principles, essential for understanding market dynamics. We'll explore how changes in various factors influence these core economic concepts and ultimately impact market equilibrium—the point where supply and demand intersect. By completing these exercises, you'll build a strong foundation in microeconomics.
Section 1: Understanding Demand
1. Define Demand: In your own words, explain what "demand" means in the context of economics. Consider the two key components: desire and ability.
2. The Demand Schedule: A demand schedule shows the relationship between the price of a good and the quantity demanded at each price, holding other factors constant. Let's consider the market for coffee. Complete the following demand schedule:
| Price per Cup | Quantity Demanded (cups) |
|---|---|
| $1.00 | 1000 |
| $1.50 | |
| $2.00 | 700 |
| $2.50 | 500 |
| $3.00 | 300 |
3. The Law of Demand: State the law of demand and explain why it exists. Relate your answer to the completed demand schedule.
4. Factors Affecting Demand: List and explain at least five factors other than price that can shift the demand curve (increase or decrease demand at every price). Provide a real-world example for each factor.
Section 2: Understanding Supply
1. Define Supply: In your own words, explain what "supply" means in economics.
2. The Supply Schedule: Now, let's create a supply schedule for the same coffee market. Complete the following table:
| Price per Cup | Quantity Supplied (cups) |
|---|---|
| $1.00 | 200 |
| $1.50 | 400 |
| $2.00 | 600 |
| $2.50 | 800 |
| $3.00 | 1000 |
3. The Law of Supply: State the law of supply and explain why it exists. Relate your answer to the completed supply schedule.
4. Factors Affecting Supply: List and explain at least five factors other than price that can shift the supply curve (increase or decrease supply at every price). Give a real-world example for each factor.
Section 3: Market Equilibrium
1. Finding Equilibrium: Using the demand and supply schedules you completed above, find the equilibrium price and quantity for coffee. Explain how you arrived at this answer.
2. Surplus and Shortage: Explain what a surplus and a shortage are in the context of supply and demand. What happens to the price when there is a surplus? What happens when there is a shortage? Illustrate with examples using the coffee market.
3. Shifts in Equilibrium: Suppose a new technology is introduced that significantly reduces the cost of producing coffee. How would this affect the supply curve? Show the new supply schedule and the resulting new equilibrium price and quantity. Illustrate this graphically if possible.
Section 4: Application and Analysis
1. Real-World Example: Choose a product you are familiar with and analyze the factors influencing its demand and supply. Discuss recent events or trends that may have shifted either the demand or supply curve for this product.
2. Policy Implications: Explain how government policies such as taxes or subsidies can affect the equilibrium price and quantity of a good. Give an example of a policy and its impact on a specific market.
This worksheet offers a comprehensive review of demand and supply. By completing each section, you'll solidify your understanding of market forces and their interplay. Remember to consult your textbook or other resources if you need additional clarification. Good luck!
