Posted: February 4th, 2021

A change in supply surge

Individual and market demand

Suppose that Gilberto and Juanita are the only consumers of scented candles in a particular market. The following table shows their annual demand schedules:

   

Price

Gilberto’s Quantity Demanded

Juanita’s Quantity Demanded

 

(Dollars per candle)

(Candles)

(Candles)

 

2

16

32

 

4

10

24

 

6

6

16

 

8

2

12

 

10

0

8

On the following graph, plot Gilberto’s demand for scented candles using the green points (triangle symbol). Next, plot Juanita’s demand for scented candles using the purple points (diamond symbol). Finally, plot the market demand for scented candles using the blue points (circle symbol).

Created with Raphaël 2.1.2

Gilberto’s Demand

Juanita’s Demand

Market Demand

0

8

16

24

32

40

48

12

10

8

6

4

2

0

PRICE (Dollars per candle)

QUANTITY (Candles)

5. A change in supply versus a change in quantity supplied

The following calculator shows the supply curve for sedans in an imaginary market. For simplicity, assume that all sedans are identical and sell for the same price. Two factors that affect the supply of sedans are the level of technical knowledge—in this case, the speed with which manufacturing robots can fasten bolts, or robot speed—and the wage rate that auto manufacturers must pay their employees. Initially, the graph shows the supply curve when robots can fasten 2,500 bolts per hour and autoworkers earn $25 per hour.

Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.

Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.

Created with Raphaël 2.1.2

0

100

200

300

400

500

600

700

800

900

50

40

30

20

10

0

PRICE (Thousands of dollars)

QUANTITY (Sedans per month)

Supply 

Graph Input Tool

   

Supply for Sedans

 

20

 

225

   

Price of a Sedan

(Thousands of dollars)

   

Quantity Supplied

(Sedans per month)

   

   

SUPPLY SHIFTERS

 

2500

 

25

   

Robot Speed

(Bolts per hour)

   

Autoworker Wage

(Dollars per hour)

Consider the previous graph. Suppose that the price of a sedan decreases from $22,000 to $17,000. This would cause the of sedans to decrease, which is reflected on the graph by a the supply curve.

Suppose the workers’ union negotiates a pay raise. This causes a the supply curve because the pay raise makes cars .

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