Supply and Demand

Figure 2.01 A Demand Curve

p, $ per kg 14.30

Demand curve for pork, D 1

4.30 3.30 2.30

200 220 240

286

Q, Million kg of pork per year

Figure 2.02 A Shift of the Demand Curve

p, $ per kg Effect of a 60 increase in the price of beef

3.30 D2 D1

176

232 220 Q, Million kg of pork per year

Application Aggregating the Demand for Cling Peaches

p, $ per ton 275

183

Total demand

Demand for canned peaches Demand for fruit cocktail 0 Qf = 4 Q c = 18 Q = 22 50 Q, Tons of peaches per 10,000 people per year

Figure 2.03 A Supply Curve

p, $ per kg 5.30 Supply curve, S 1

3.30

176

220

300 Q, Million kg of pork per year

Figure 2.04 A Shift of a Supply Curve

p, $ per kg Effect of a 25 increase in the price of hogs S2 S1 3.30

176

205

220 Q, Million kg of pork per year

Figure 2.5 Total Supply: The Sum of Domestic and Foreign Supply

(a) Japanese Domestic Supply p, Price per ton Sd

(b) Foreign Supply p, Price per ton S f (ban) Sf (no ban)

(c) Total Supply p, Price per ton S (ban) S (no ban)

p*

p*

p*

p Qd* Qd , Tons per year

p Qf* Qf, Tons per year

p Q = Qd* Q * = Qd* + Qf* Q, Tons per year

Solved Problem 2.1

(a) U.S. Domestic Supply p, Price per ton

(b) Foreign Supply p, Price per ton Sf Sf

(c) Total Supply p, Price per ton S S

Sd

p*

p*

p*

Qd

Qd*

Qf

Qf*

Qd , Tons per year

Qf , Tons per year

Qd + Qf Qd* + Qf Qd + Qf* * Q, Tons per year

Figure 2.06 Market Equilibrium

p, $ per kg Excess supply = 39 3.95 3.30 2.65 Excess demand = 39 D e S

176

194

207

220 233 246 Q, Million kg of pork per year

Figure 2.07a Effects of a Shift of the Demand Curve

(a) Effect of a 60 Increase in the Price of Beef p, $ per kg

3.50 3.30

e2 e1

S D2 D1

176

220

228 232

Excess demand = 12 Q, Million kg of pork per year

Figure 2.07b Effects of a Shift of the Demand Curve

(b) Effect of a 25 Increase in the Price of Hogs p, $ per kg

3.55 3.30

e2 e1

S2 S1

176

205

215 220

Excess demand = 15 Q, Million kg of pork per year

Figure 2.08 A Ban on Rice Imports Raises the Price in Japan

p, Price of rice per pound S (ban) S (no ban) p2 e2

p1

e1

D Q2 Q1 Q, Tons of rice per year

Solved Problem 2.3

p, Price of steel per ton S (quota) S (no quota) e3 p3 p2 p p1 e2

e1 D h (high) D l (low) Q1 Q3 Q2 Q, Tons of steel per year

Figure 2.09 Price Ceiling on Gasoline

p, $ per gallon S2 S1

e2 p2 e1 p1 = p Price ceiling

D Qs Q2 Q1 = Qd Q, Gallons of gasoline per month

Excess demand

Figure 2.10 Minimum Wage

w, Wage per hour

S Minimum wage, price floor

w*

D Ld L* Unemployment Ls L, Hours worked per year