Name: ____________________________ Period: ______ Date: ___________________

Classwork – Demand and Supply Practice Activity (30 points)

Exercise 1: Graphing the Demand Curve. Use the data presented in the Demand Schedule for DVDs to graph the
demand curve in the chart below.

Demand Schedule For DVDs

Price per Quantity
DVD Demanded
(in dollars) (in millions) DEMAND CURVE*
20 100 20
19 200 19
18 300 18

Price per DVD

17 400

(in dollars)
17
16 500
16
15 600
15
14 700
14
13 800
13
12 900
12
11 1000
11
100 200 300 400 500 600 700 800 900 1000
Quantity Demanded
Exercise 2: Movement Along
The Demand Curve. Answer the (in millions)
following questions based on the demand curve you have graphed:

1. When the price of a DVD is $20, what is the quantity demanded by consumers?
2. When the price of a DVD is $15, what is the quantity demanded by consumers?
3. When the price of a DVD is $11, what is the quantity demanded by consumers?
4. As the price of a DVD decreases, does the quantity of DVDs demanded increase or decrease?
5. As the price of a DVD increases, does the quantity of DVDs demanded increase or decrease?

Exercise 3: Characterizing the relationship between the change in price and the change in quantity
demanded:

Lines A and B are depicted in the table below. Line A depicts an inverse relationship between two variables that
is characteristic of a demand curve; line B depicts a direct relationship between two variables.
Line A Line B

y y

x x
Negative slope: Inverse relationship Positive slope: Direct relationship
between x and y variables; when y between x and y variables; when y
decreases, x increases. increases, x increases.

For each pair of variables below, indicate whether the relationship between them is direct or indirect:
Variable 1 (Y) Variable 2 (X) Relationship: Direct or indirect?
Years of education Lifetime income
Hours spent studying for math exam Score on math exam
Frequency of hand washing using Incidence of cold and flu symptoms
anti-bacterial soap
Price of a product Quantity demanded of product
Exercise 4: Shifts in the Demand Curve. Demand Schedule for DVDs
In recent years, sales of DVDs have decreased as many
Quantity Quantity
consumers have elected to stream directly into their playing
Price per Demanded Demanded
devices. Of course, the cost to stream is less than the cost of a
DVD (D1) (D2)
DVD. The demand for DVDs is shown in the demand
schedule as D1. 20 100 125
19 200 250
Imagine that as a result of pressure from the movie industry, 18 300 375
streaming is outlawed, and the only way to purchase video is 17 400 500
to buy a DVD. Demand for DVDs increases and is now 16 500 625
shown in the demand schedule as D2. 15 600 750
14 700 875
13 800 1000
12 900 1125
11 1000 1250

• Using the data presented in the Demand Schedule for DVDs, graph the demand curves D1 and D2 in the
chart below.

20
19
18
Price per DVD

17
16
15
14
13
12
11
100 200 300 400 500 600 700 800 900 1000 1100 1200 1300
Quantity Demanded

Refer to the chart you have drawn and answer the following questions:
1. When DVDs sell for $18, compare the quantity demanded for DVDs at demand levels D1 and D2.
2. Explain why more customers are now willing to purchase DVDs for the same price.
3. When demand increases at all price levels, the demand curve shifts in which direction: right or left?
4. Explain the difference between an increase in demand and increase in the quantity demanded.
a. Which is depicted as a movement along the demand curve?

b. Which is depicted as a shift in the demand curve?

Exercise 5: Identifying the determinants of demand. In exercise 2, you have seen have how an increase in
demand is depicted on a graph by a shift in the demand curve.
• When the demand curve shifts upward and to the right, this is indicative of an increase in demand.
• When the demand curve shifts to the left, this is indicative of a decrease in demand.
• Factors that result in a change in demand are the determinants of demand.

Working individually or as pair, complete the table below. For each determinant of demand:
• indicate whether demand will increase or decrease;
• provide an explanation as to why.

2
 Determinant of demand Demand Explanation
increases or
decreases?
Population increases

Population decreases

Increase in most peoples’ income

Decrease in most peoples’ income

Price of substitute increases

Price of substitute decreases

Price of complementary good increases

Price of complimentary good decreases

Product becomes a popular fad (change in

taste of buyers)
Product now out of fashion (change in taste
of buyers)
There is an expectation that the price of the
product will soon fall
There is a fear that the economy will go into
a recession where many firms will fail and
unemployment will increase

Movement along the curve or a shift in the demand curve? Complete the table below by indicating whether each
scenario results in a change in the quantity demanded (movement along the demand curve), or a change in demand
(shift in the demand curve). If there is a shift in the demand curve, indicate whether the curve shifts up or down.

Scenario Movement or shift up or shift

down?
1. There is an outbreak of the flu and sales of latex gloves skyrocket.

2. A nail salon cuts the price it charges for manicures and more clients come.

3. A chain of department stores extends the hours that stores will remain
open and total sales for the chain has increased.

4. The US Census Bureau has announced that there is baby boom in the
United States and sales of baby carriages have increased.

5. John’s Bicycle shop increases the prices of bicycles and sales decrease.

6. The City of Los Angeles has cut the number of city employees by 10% and
sales of big screen televisions falls.

3
 Exercise 6: Create a Supply Curve
The survey to assess students’ willingness to work at the library was distributed to all seniors in the
school; the total hours that students are willing to work at the different hourly rates are presented in the
supply schedule for part time workers below:

Supply Schedule for Part Time Workers

Hourly rate # hours seniors are willing to
work
$30 1500
$25 1440
$20 1380
$15 1100
$10 840
$7 480
$5 240
$3 0
$2 0
$1 0

Using the data in the supply schedule for part time workers, draw the supply curve.

Supply of Part Time Workers

$30

$25

$20
Hourly rate

$15

$10

$7

$5

$3

$0

200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 2600

Quantity of Part Time Workers Supplied

In your own words, summarize the information displayed in the graph.

4
Exercise 7: Changes in Supply – A Shift in the Demand Curve

The supply schedule below presents the results of a survey of seniors only, and seniors and juniors,
indicating the number of hours these students would be willing to work in the school library at different
hourly rates of pay.

Supply Schedule of Student Workers’ Hours

Hourly rate # hours juniors are # hours seniors are # hours juniors and
willing to work (S1) willing to work (S2) seniors are willing to
work (S3)
$30 1125 1500 2625
$25 1080 1440 2520
$20 1035 1380 2415
$15 825 1100 1925
$10 630 840 1470
$7 360 480 840
$5 180 240 420
$3 0 0 0
$2 0 0 0
$1 0 0 0

Using the data from the supply schedule for part time workers, draw supply curves S2 and S3 on the
graph below.

Supply of Part Time Workers

35

30

25
Hourly Rates

20

15

10

0
0 500 1000 1500 2000 2500 3000
Quantity of Part Time Hours

5
Refer to the chart you have drawn and answer the following questions:
1. When the hourly rate is $20, compare the quantity of hours students are willing to work at supply
levels S2 and S3.
2. When supply increases at all price levels, the supply curve shifts in which direction: right or left?
3. Explain the difference between an increase in supply and increase in the quantity supplied.
4. Which is depicted as a movement along the supply curve?
5. Which is depicted as a shift in the supply curve?

Exercise 8: In the table below, complete the following:

1. Record the affect on supply of each of the four determinants.
2. In each instance, state if the supply curve shifts right or left.
3. In your own words provide an explanation of the suppliers’ reactions.

Determinant of supply Affect on supply Explanation

A decrease in the
price of inputs.

A change in the price of

inputs (raw materials, wages,
An increase in the
etc.)
price of inputs.

Increase in the
number of firms in
the industry

A change in the number of

firms in the industry. Decrease in the
number of firms

Increase in taxes

A change in taxes
Decrease in taxes

Technology development

6
Equilibrium

Imagine that you have opened a small business in your school selling Italian ices. You make the
ices from fresh fruit – lemons, oranges, blueberries and cherries - using a family recipe that your
grandfather has passed along. You are concerned about the price you pay for the fruit, as the
price you pay for the ingredients is reflected in the price you charge your customers, and you are
aware that there is a limit to what your customers are willing to pay. Although you would like to
offer variety to your customers, if the price of any of the fruits becomes too high, you will cut
back on your purchases, and offer less of that flavor to your customers. The quantity of lemons
you are willing to purchase at various prices per bushel is presented in the table below.

• The lemon supplier obtains lemons directly from growers in Florida and has a variety
of customers that include restaurants, supermarkets and fruit vendors.

• The quantity of lemons you are willing to purchase and the quantity of lemons the
supplier is willing to offer at various prices per bushel are presented in the table
below:

Price per bushel Quantity Quantity

demanded (D) supplied (S)
$40 20 60
$32 30 50
$24 40 40
$16 50 30
$8 60 20

Exercise 9: For each price per bushel in the table:

• Indicate whether there is a shortage (quantity demanded > quantity supplied) or a surplus
(quantity supplied > quantity demanded)
• Indicate the amount of the shortage or surplus.

Price per Quantity Quantity Surplus or Amount

bushel demanded (D) supplied (S) shortage
$40 20 60
$32 30 50
$24 40 40
$16 50 30
$8 60 20
1. When a surplus exists:
a. Suppliers respond; the lemon supplier has unsold lemons that will soon go bad.
i. If the supplier is willing to offer lemons at a lower price, what happens to
the quantity of lemons demanded?

ii. What happens to the size of the surplus as suppliers lower the price of
lemons?

7
 2. When a shortage exists:
a. Suppliers respond; since the lemon supplier is able to sell all the lemons at the
current price, this is a good opportunity to raise prices to increase profits. As long
as the quantity demanded is greater than quantity supplied, suppliers can continue
to raise prices.
i. What happens to the quantity of lemons demanded as suppliers raise the
price?

ii. What happens to the size of the shortage when suppliers raise the price?

b. Consumers respond; since at these prices the supply of lemons is less than
demand, those who value the lemons the most are willing to pay more if they have
to obtain lemons. Everyone does not value lemons equally. Consumers who value
lemons the most will be willing to pay more.
i. What happens to the quantity of lemons demanded as the price increases?

ii. What happens to the size of the shortage as the price of lemons increases?

iii.
3. At equilibrium (when there is neither a shortage nor a surplus):
a. Supply and demand is in balance, there is no pressure to change.
i. Can you explain why there is no pressure for the equilibrium price to
change?
ii. Can you think of events that would disturb this equilibrium?
Exercise 10:

Points A, B and C in the chart below depict either a shortage, a surplus or an equilibrium.
Indicate what each letter represents in the chart by circling the correct term:

A. Shortage, surplus, equilibrium point

B. Shortage, surplus, equilibrium point
C. Shortage, surplus, equilibrium point