Chapter 3 (Appendix) illustrate how supply and demand analysis can provide insights on actual-economy situations. This chapter presents the following content: Lettuce, exchange rates, pink salmon, gasoline, sushi, preset prices. | Demand, Supply, and Market Equilibrium 3A McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Appendix 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- Lettuce LO6 D1 S1 Q1 P1 Quantity (pounds) Price (per pound) S2 Q2 P2 0 3App- 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- Exchange Rates LO6 D1 S1 Q1 $ Quantity of euros Dollar price of 1 euro D2 0 $ Q2 3App- 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- Pink Salmon LO6 D1 S1 Q1 P1 Quantity (in pounds) Price (per pound) S2 D2 P2 Q2 0 3App- 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- Gasoline LO6 D2 S2 Q1 P2 Quantity (in gallons) Price (per gallon) S1 D1 P1 Q2 0 3App- Sushi Supply shifts right Increase in the number of sushi bars Demand shifts right Consumers’ tastes for sushi increases LO6 3App- Sushi LO6 D2 S2 Q1 Quantity (pounds) Price (per pound) S1 D1 P1 Q2 0 3App- 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 LO6 3App- Preset Prices LO6 D S P1 P2 Q1 Q2 0 P Figure Skating Quantity (tickets) Price (per ticket) D S P1 P2 Q1 Q2 0 P Curling Quantity (tickets) Price (per ticket) a b Shortage a b Surplus 3App- | Demand, Supply, and Market Equilibrium 3A McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Appendix 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- Lettuce LO6 D1 S1 Q1 P1 Quantity (pounds) Price (per pound) S2 Q2 P2 0 3App- 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- Exchange Rates LO6 D1 S1 Q1 $ Quantity of euros Dollar price of 1 euro D2 0 $ Q2 3App- Pink Salmon Supply shifts right for pink salmon New technology New fishers enter the industry Demand shifts left for pink .
