Lecture Economics (19/e) - Chapter 3-Appendix: Demand, supply, and market equilibrium

3A

Appendix

Demand, Supply, and Market 
Equilibrium

McGraw-Hill/Irwin

Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.


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

LO6

3App-2


Lettuce
S2

Price (per pound)

S1
P2
P1

D1
0

Q2

Q1

Quantity (pounds)
LO6

3App-3


Exchange Rates

• Exchange rates – the price of one

country’s currency in terms of another
country’s currency
• Currency appreciation: the value of
one of the currencies, in terms of
the other, has increased
• Currency depreciation: the value of
one of the currencies, in terms of

the other, has decreased.

LO6

3App-4


Dollar price of 1 euro

Exchange Rates

S1
$1.50
$1.25
D2
D1
0

Q1 Q2
Quantity of euros

LO6

3App-5


Pink Salmon

• Supply shifts right for pink salmon
• New technology

• New fishers enter the industry
• Demand shifts left for pink salmon
• Increases in consumer’s income
• Reductions in the price of
substitutes

LO6

3App-6


Pink Salmon
S1
Price (per pound)

S2
P1

P2
D2
0

Q1

D1

Q2

Quantity (in pounds)

LO6

3App-7


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
LO6

3App-8


Gasoline

Price (per gallon)

S2

S1

P2

P1

D2
D1

0

Q1 Q2
Quantity (in gallons)

LO6

3App-9


Sushi

• Supply shifts right
• Increase in the number of sushi
•

LO6

bars
Demand shifts right
• Consumers’ tastes for sushi
increases

3App-10

Sushi
S1
Price (per pound)

S2

P1

D2
D1
0

Q1

Q2

Quantity (pounds)

LO6

3App-11


Preset Prices

• Preset prices can cause market
•
•

LO6

imbalances
Olympics Figure Skating Finals
• Preset price results in a shortage of
tickets
Olympics Curling Preliminaries
• Preset prices result in a surplus of
tickets
3App-12


Preset Prices

P

S

P2

b

P1

0

a

Shortage

D

Q1

Q2

Figure Skating
Quantity (tickets)

LO6

Price (per ticket)

Price (per ticket)

P

S
Surplus

P2

a

b

P1

D

0
Q2

Q1

Curling
Quantity (tickets)

3App-13