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Chapter 3 Appendix

Chapter 3 Appendix. Additional Examples of Supply and Demand. Lettuce. Supply shifts left for lettuce Weather destroys part of the crop Demand doesn’t change Consumers still want as much lettuce as before Equilibrium price rises which will reduce the quantity demanded. LO7.

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Chapter 3 Appendix

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  1. Chapter 3Appendix Additional Examples of Supply and Demand

  2. Lettuce • Supply shifts left for lettuce • Weather destroys part of the crop • Demand doesn’t change • Consumers still want as much lettuce as before • Equilibrium price rises which will reduce the quantity demanded LO7

  3. Lettuce Continued S2 S1 P2 Price (per pound) P1 D1 0 Q2 Q1 Quantity (pounds) LO7

  4. Exchange Rates • Exchange rates are the price of one country’s currency in terms of another country’s currency • Currency appreciation • Currency depreciation LO7

  5. Exchange Rates Continued S1 $1.50 Dollar price of 1 euro $1.25 D2 D1 0 Q1 Q2 Quantity of euros LO7

  6. Pink Salmon • Supply shifts right for pink salmon • New technology • New fishers enter the industry • Demand shifts left for pink salmon • Increases in consumers’ income • Reductions in the price of substitutes LO7

  7. Pink Salmon Continued S1 S2 P1 Price (per pound) P2 D1 D2 0 Q1 Q2 Quantity (in pounds) LO7

  8. Gasoline • Supply of gasoline decreases • Refinery breakdowns • Mideast politics and warfare • Rising price of oil • Demand for gasoline increases • Consumers’ incomes increased • Low mileage SUVs popular LO7

  9. Gasoline Continued S2 S1 P2 Price (per gallon) P1 D2 D1 0 Q1 Q2 Quantity (in gallons) LO7

  10. Sushi • Supply shifts right • Increase in the number of sushi bars • Demand shifts right • Consumers’ tastes for sushi increases LO7

  11. Sushi Continued S1 S2 P1 Price (per pound) D2 D1 0 Q1 Q2 Quantity (pounds) LO7

  12. Land in San Francisco • Vertical supply curve • Quantity supplied fixed and unresponsive to price changes • Demand increase causes price to rise but quantity stays the same • Demand decrease causes price to fall but quantity stays the same • Explains high real estate prices in cities LO7

  13. Land in San Francisco Continued S1 P2 Price (per acre) P1 D2 D1 0 Q0 Quantity of land (acres) LO7

  14. Preset Prices • Preset prices can cause market imbalances • Olympics figure skating finals • Preset price results in a shortage of tickets • Olympics curling preliminaries • Preset prices result in a surplus of tickets LO7

  15. Preset Prices Continued P P S S Surplus a b P2 Price (per ticket) Price (per ticket) P2 P1 b a P1 Shortage 0 0 D D Q1 Q2 Q2 Q1 Figure Skating Quantity (tickets) Curling Quantity (tickets) LO7

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