Graph Practice

1
Unit 2 Graph Practice
2
Draw a graph that shows what happens when more
and more firms begin to produce a good.
3
Pizza Parlors In Fort Wayne 1970 - 2008
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
4
Pizza Parlors In Fort Wayne 1970 - 2008
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
Explain Why This Happens
Very Simple The more firms producing the good
the greater the supply of that good!
5
Draw a graph that shows what happens when
consumer taste for a product improves.
6
Flat Screen TVs
Price
S
P2
Pe
D2
D1
Qe
Q2
Quantity
7
S
Flat Screen TVs
Price
P2
Pe
D2
D1
Quantity
Qe
Q2
Fill in the blanks There is a change in
________ and a change in the quantity___________
Fill in the blanks There is a change in DEMAND
and a change in the quantity SUPPLIED
8
Draw a graph that shows what happens when the
price of a resource used to make a good increases.
9
Shirts When Cloth Prices Go Up
Price
S2
S1
P2
Pe
D
Quantity
Qe
Q2
10
Shirts When Cloth Prices Go Up
Price
S2
S1
P2
Pe
D
Quantity
Qe
Q2
When the cost of a resource goes upproducers
cannot make as many products as they did before.
Explain Why This Happens
11
Draw a graph that shows what happens when
consumer income rises and the good is a
NORMAL GOOD.
12
Won the Lottery - Steaks
Price
S
P2
Pe
D2
D1
Qe
Q2
Quantity
13
S
Win the Lottery- Steaks
Price
P2
Pe
D2
D1
Quantity
Qe
Q2
Normal Good as your income goes up, you want
more of a normal good. As your income falls, you
want less of a normal good
Define Normal Good
14
Draw a graph that shows what happens when
something like a war destroys the current
technology.
15
Production After A War
Price
S2
S1
P2
Pe
D
Quantity
Qe
Q2
16
Production After A War
Price
S2
S1
P2
Pe
D
Quantity
Qe
Q2
Explain Why This Happens
The ability to produce at the previous level is
no longer possible.
17
Draw a graph that shows what happens to Good A
when the price of a complementary Good B
decreases.
18
Good B is on Sale Graph of Good A
Price
S
P2
Pe
D2
D1
Qe
Q2
Quantity
19
S
Good B is on sale Graph of Good A
Price
P2
Pe
D2
D1
Quantity
Qe
Q2
Complements are goods that are used together. As
the price of Good A goes down, you can afford
more of that goodand therefore you also buy more
of its complement, Good B.
Define Complement Goods
20
Draw a graph that shows what happens when income
rises and the good is an inferior good.
21
Win the Lottery Garage Sale Mowers
Price
S
Pe
P2
D1
D2
Qe
Q2
Quantity
22
S
Win the Lottery Garage Sale Mowers
Price
Pe
P2
D1
D2
Quantity
Qe
Q2
Inferior Good as your income goes up, you want
less of an inferior good. As your income falls,
you want more of an inferior good
Define Inferior Good
23
Draw a graph that shows what happens when
consumers believe that the price of a good will
increase in the near future.
24
Consumer Speculation That Diamond Prices Will
Increase With African Wars
Price
S
P2
Pe
D2
D1
Qe
Q2
Quantity
25
S
Consumer Speculation That Diamond Prices Will
Increase With African Wars
Price
P2
Pe
D2
D1
Quantity
Qe
Q2
If you think the price of something is going to
increase tomorrowyou hurry and buy it today
before that happens.
Explain why this happens
26
Draw a graph that shows what happens when
producers start leaving a market.
27
Record Stores in Fort Wayne 1968 - 2008
S2
Price
S1
P2
Pe
D
Quantity
Qe
Q2
28
Record Stores in Fort Wayne 1968 - 2008
Price
S2
S1
P2
Pe
D
Quantity
Qe
Q2
Very Simple The less producers there are of a
good or service the less available the goods and
services they produce.
Explain Why This Happens
29
Draw a graph that shows what happens when a good
is no longer popular with the consumers.
30
Sony Walkmans 1980 - 2008
Price
S
Pe
P2
D1
D2
Qe
Q2
Quantity
31
S
Sony Walkmans 1980 - 2008
Price
Pe
P2
D1
D2
Quantity
Qe
Q2
Fill in the blanks As demand for the good
DECREASES , the price FALLS , and the QUANTITY
supplied decreases.
Fill in the blanks As demand for the good ____
, the price _____ , and the _____ supplied
decreases.
32
Draw a graph that shows what happens to the
demand for Good A when the price of its
complement goes up.
33
Basketball Prices Skyrocket Graph Hoops
Price
S
Pe
P2
D1
D2
Qe
Q2
Quantity
34
Basketball Prices Skyrocket Graph Hoops
S
Price
Pe
P2
D1
D2
Quantity
Qe
Q2
Good A and Good B are COMPLEMENTS they are used
together. If the price of Good B goes up then
people buy less of itand therefore have less
need to buy Good A
Explain Why This Happens
35
Draw a graph that shows what happens in the
two-pocket folder industry when three-pocket
folders are hard to sell at half their previous
price.
36
Two Pocket Folder Industry Alternate Good
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
37
Two Pocket Folder Industry Alternate Good
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
If you currently make three pocket folders and
you find out you can make more money making two
pocket foldersyou switch!
Explain Why This Happens
38
Draw a graph that shows what happens when the
consumer suspects that prices may fall in the
future.
39
Rumors that GM will soon be letting all customers
buy at employee pricing
Price
S
Pe
P2
D1
D2
Qe
Q2
Quantity
40
S
Rumors that GM will soon be letting all customers
buy at employee pricing
Price
Pe
P2
D1
D2
Quantity
Qe
Q2
You plan to buy a goodbut you believe it will go
on sale next week. So for now, your demand for
the good diminishes.
Explain Why This Happens
41
Draw a graph that shows what happens when the
price of a substitute increases.
42
Old NavyTee Prices Up Graph Gap Tees
Price
S
P2
Pe
D2
D1
Qe
Q2
Quantity
43
Old Navy Tee Prices Up Graph Gap Tees
S
Price
P2
Pe
D2
D1
Quantity
Qe
Q2
As the price of Old Navy T-shirts Increase
People decide to buy more Gap T-shirts instead
Explain What Happens
44
Draw a graph that shows what happens when the
price of a substitute decreases.
45
The Price of Dell Computers Go Down Graph Apple
Computers
Price
S
Pe
P2
D1
D2
Qe
Q2
Quantity
46
S
Price
The Price of Dell Computers Go Down Graph Apple
Computers
Pe
P2
D1
D2
Quantity
Qe
Q2
As Dell Computers become cheaper and cheaper,
they become more attractive to the consumersso
people stop buying as many Apple Computers
Explain Why This Happens
47
Draw a graph that shows what happens when the
number of consumers increase.
48
Cheap Housing When Soldiers Return After WW II
Price
S
P2
Pe
D2
D1
Qe
Q2
Quantity
49
S
Cheap Housing When Soldiers Return After WW II
Price
P2
Pe
D2
D1
Quantity
Qe
Q2
More Consumers So More
Buying
Explain What Happens
50
Draw a graph that shows what happens when there
is a profound improvement in technology.
51
Production After The Invention of The Computer
Chip
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
52
Production After The Invention of The Computer
Chip
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
Once computers were part of the production
process we were able to make sooooooooooo much
more.
Explain Why This Happens
53
Draw a graph that shows what happens when the
number of consumers decrease.
54
Pitchforks After The Bubonic Plague
Price
S
Pe
P2
D1
D2
Qe
Q2
Quantity
55
S
Pitchforks After The Bubonic Plague
Price
Pe
P2
D1
D2
Quantity
Qe
Q2
Less People Less Farmers Less Consumers
Demand for Pitchforks Falls
Explain Why This Happens
56
Draw a graph that shows what happens to demand
when a college football star signs a pro contract.
57
Demand When Income Is Expected To Increase
Price
S
P2
Pe
D2
D1
Qe
Q2
Quantity
58
S
Demand When Income Is Expected To Increase
Price
P2
Pe
D2
D1
Quantity
Qe
Q2
You spend more money when you think your income
will be going up soon.
Explain What Happens
59
Draw a graph that shows what happens when you
anticipate losing your income.
60
Stock Market Crash Is Eating Away At Retirement
Incomes
Price
S
Pe
P2
D1
D2
Qe
Q2
Quantity
61
S
Stock Market Crash Is Eating Away At Retirement
Incomes
Price
Pe
P2
D1
D2
Quantity
Qe
Q2
As the elder generation sees its retirement
income fading awaythey are reluctant to continue
living their present lifestyle and make fewer
purchases.
Explain Why This Happens
62
Draw a graph that shows what happens when the
price of a resource used to make a good decreases.
63
Houses When Lumber Prices Go Down
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
64
Houses When Lumber Prices Go Down
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
When the cost of a resource goes downproducers
can make more products than they did before.
Explain Why This Happens
65
Draw a graph that shows what happens when a tax
on the producers is removed.
66
Yacht Supply After The Watercraft Production Tax
Was Removed
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
67
Yacht Supply After The Watercraft Production Tax
Was Removed
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
A tax on a producer is basically a cost. Once a
cost is removed, more can be produced using the
same resources.
Explain Why This Happens
68
Draw a graph that shows what happens when the
government taxes the production of a good.
69
Pollution After Carbon Emissions Were Taxed
S2
Price
S1
P2
Pe
D
Quantity
Qe
Q2
70
Pollution After Carbon Emissions Were Taxed
Price
S2
S1
P2
Pe
D
Quantity
Qe
Q2
A tax is a cost. If the costs go up for a
producerthey are not able to produce as much as
they were before.
Explain Why This Happens
71
Draw a graph that shows what happens when
production of a good is subsidized.
72
Hybrid Cars When The Government Pays Automakers
1000 Per Car
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
73
Hybrid Cars When The Government Pays Automakers
1000 Per Car
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
A subsidy reduces the costs of producing a good.
So when costs fall the producer can make more.
Explain Why This Happens
74
Draw a graph that shows what happens when the
government stops subsidizing the production of a
good.
75
Truck Industry When Government Removes Subsidy
S2
Price
S1
P2
Pe
D
Quantity
Qe
Q2
76
Truck Industry When Government Removes Subsidy
Price
S2
S1
P2
Pe
D
Quantity
Qe
Q2
Now that the government wants people to ship by
rail instead of by road, they have taken away a
trucking subsidy. So the number of trucks hauling
goods declines.
Explain Why This Happens
77
Draw a graph that shows what happens when an
alternate goods price increases dramatically.
78
Softball Industry When Baseballs Sell For Twice
The Price
S2
Price
S1
P2
Pe
D
Quantity
Qe
Q2
79
Softball Industry When Baseballs Sell For Twice
The Price
Price
S2
S1
P2
Pe
D
Quantity
Qe
Q2
An ALTERNATE GOOD is made using the same
resources as the good a producer is currently
making. A producer will switch to that good if
she can make more money producing the alternate.
Explain What An Alternate Good Is
80
Draw a graph that shows what happens when
producers suspect that the price of the good they
are making will fall in the near future.
81
Skinny Jeans In The U.S. When The Price Of These
Falls In Paris
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
82
Skinny Jeans In The U.S. When The Price Of These
Falls In Paris
Price
S1
S2
Pe
P2
D
Quantity
Qe
Q2
American jeans makers predict that all those
jeans in the warehouses will not be in fashion in
the U.S. in a few months so they want to dump
them before that happens!
Explain Why This Happens
83
Draw a graph that shows what happens when
producers anticipate the price of their goods
will increase in the future.
84
Corn Futures Are Trending Upward
S2
Price
S1
P2
Pe
D
Quantity
Qe
Q2
85
Corn Futures Are Trending Upward
Price
S2
S1
P2
Pe
D
Quantity
Qe
Q2
Farmers decide to put the corn in the silos
because they hope the longer they hold on to it
the more they will be able to sell it for.
Explain Why The Supply Of Corn Falls In The Market
86
Draw a graph showing perfectly inelastic demand.
87
Price
Perfectly Inelastic Demand
D
Quantity
88
Price
Perfectly Inelastic Demand
D
Quantity
WHAT IS MEANT BY PERFECTLY INELASTIC?
89
Price
Perfectly Inelastic Demand
D
Quantity
Qe
That if the price goes up or if the price goes
down, the quantity demanded stays the same. A
change in price has NO impact on the quantity
demanded!
90
Draw a graph showing perfectly elastic demand.
91
Price
Perfectly Elastic Demand
D
Quantity
92
Price
Perfectly Elastic Demand
D
Quantity
WHAT IS MEANT BY PERFECTLY ELASTIC?
93
Price
Perfectly Elastic Demand
Pe
D
Quantity
That if the price goes up, the quantity demanded
will change to zero. A change in price completely
changes the quantity demanded!
94
What is the formula used to determine the
Elasticity of Demand?
95
Ed
?Q
___________________________________
?P
96
What is the elasticity if Ed 1
97
What happens to Total Revenue When You Drop the
price on an Elastic Good?
Price
5 4 3 2 1 0
TR before
TR AFTER
D
1 2 3 4
5 6 7
Quantity
98
So what was that formula used to determine the
Elasticity of Demand?
99
Ed
?Q
___________________________________
?P
100
Ed 1 means that the demand for the good is
Price
ELASTIC
5 4 3 2 1 0
D
1 2 3 4
5 6 7
Quantity
101
What is the elasticity coefficient
for an Inelastic Demand Curve?
102
Ed Because the percentage change in the price is
larger than the percentage change in the quantity
demanded
103
What happens to Total Revenue When You Drop the
price on an Inelastic Good?
Price
5 4 3 2 1 0
TR before
TR AFTER
D
1 2 3 4
5 6 7
Quantity
104
Explain the Green and Yellow Shaded Areas
Price
S
Pe
D
Qe
Quantity
105
Green represents Consumer Surplus
Price
S
These CONSUMERS are paying Pe when they
were willing to pay more for the good. CONSUMER
SURPLUS
Pe
D
Qe
Quantity
106
YELLOW represents Producer Surplus
Price
S
These PRODUCERS are being paid Pe when they were
willing to be paid less for the good. PRODUCER
SURPLUS
Pe
D
Qe
Quantity
107
What does this rectangle represent?
Price
S
Pe
Total Revenue
D
Qe
Quantity
108
Show with a graph what happens when the
government steps in and mandates a change because
prices are too high.
Dont go to the next slide until you are sure you
have shown EVERYTHING!
109
S
Price Ceiling
Price
CS
Pe
DWL
Pc
Pc
PS
D
Quantity
Qe
Qs
Qd
Shortage
110
Show with a graph what happens when the
government steps in and mandates a change because
prices are too low.
Dont go to the next slide until you are sure you
have shown EVERYTHING!
111
S
Price Floor
Price
CS
Pf
Pf
PS
Pe
DWL
D
Quantity
Qe
Qs
Qd
Surplus
112
Its Formula Time
Define and Explain the
Cross Elasticity of Demand
113
?Qx
EXY
?PY
EXY 0 The Goods Are Substitutes
EXY 114
Its Formula Time
Define and Explain Income
Elasticity
115
?Q
Ei
? I
Ei 0 The Goods Are Normal Goods
Ei