Supply and Demand – Discussion

Supply and Demand – Discussion

Please answer both questions 200 words a piece.


1. You have learned that changes in price or other factors such as income or number of sellers will impact the demand and supply sides of the market. Recall that changes in current price are illustrated by movement along the curve and cause changes in either “quantity demanded” or “quantity supplied.” Other factors will cause either the demand or supply curve to shift and are referred to as changes in “demand” or changes in “supply.”

Choose one of the following and determine whether there is correct usage of the terms “demand,” “quantity demanded,” “supply” and “quantity supplied.” Why or why not?

a.    The price of Burger King’s Whopper hamburger declines causing the demand for Whoppers to shift to the right.


b.    Because of a shortage of potatoes, the supply of French fries decreases.


c.    Wage labor in the peanut butter industry increases causing the quantity demanded for jelly to decrease.


d.    In the six months following Hurricane Katrina, the quantity supplied of oil in the Gulf of Mexico declined by 25 %.

It is a snowy winter and snow shovel prices have increased. Suppliers increase supply to take advantage of these higher prices.


2. Higher education has become increasingly expensive. And although the rate of increase has declined, education now costs much more than it did. One of the ways the government controls prices is by setting a floor or a ceiling on the market. Explain what might happen in the market for higher education if the government placed a price ceiling on the cost of one undergraduate credit hour? Consider the following:

1.Does it matter whether or not the ceiling is set above or below the equilibrium price?

2.Who might benefit from this price restriction?

3.Who might be harmed from this price restriction?

Explain your answers using economic theory.

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