Demand and Supply Worksheet for Economic Analysis

Let's solve and explain the Demand and Supply Worksheet step by step.

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🔹 Part 1: Law of Demand

Definition (Fill in):
Law of Demand – *The relationship between the price of a product and the quantity demanded, where, all else being equal, as the price increases, the quantity demanded decreases, and vice versa.*

> ✔ This is an inverse relationship — higher prices lead to lower quantities demanded.

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🔹 Graphing Demand

We are given three columns of data:

| Price | Quantity Demanded (Qd) | Income Increases (Qd ↑) | Taste Change (Qd ↓) |
|-------|------------------------|--------------------------|----------------------|
| $0.50 | 100 | 160 | 90 |
| $0.60 | 90 | 150 | 80 |
| $0.70 | 80 | 140 | 70 |
| $0.80 | 70 | 130 | 60 |
| $0.90 | 60 | 120 | 50 |
| $1.00 | 50 | 110 | 40 |

#### 📈 Instructions:
- Label the x-axis as Quantity Demanded (Qd).
- Label the y-axis as Price ($).
- Plot three demand curves using different colors:
1. Original Demand (Qd)
2. Demand when income increases → shifts right
3. Demand when taste changes (decreases) → shifts left

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✔ How to Plot the Graphs:

#### Step-by-step plotting:

For each curve, plot points (Price, Qd):

1. Original Demand Curve (Qd):
- (100, 0.50), (90, 0.60), (80, 0.70), (70, 0.80), (60, 0.90), (50, 1.00)

2. Income Increases (New Qd):
- (160, 0.50), (150, 0.60), (140, 0.70), (130, 0.80), (120, 0.90), (110, 1.00)

3. Taste Changes (Qd ↓):
- (90, 0.50), (80, 0.60), (70, 0.70), (60, 0.80), (50, 0.90), (40, 1.00)

> ⚠️ Remember: Price is on the Y-axis, Quantity on the X-axis.

#### Interpretation:
- The original demand curve shows the standard downward slope.
- Income increase → people buy more at every price → demand shifts right.
- Taste change (less preference) → people buy less at every price → demand shifts left.

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🔹 Part 2: Law of Supply

Definition (Fill in):
Law of Supply – *The relationship between the price of a good or service and the quantity supplied, where, all else being equal, as the price increases, the quantity supplied increases, and vice versa.*

> ✔ This is a direct relationship — higher prices encourage producers to supply more.

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🔹 Graphing Supply and Demand

Now we have two tables:

#### Supply Table:
| Price | Quantity Supplied (Qs) |
|-------|-------------------------|
| $0.50 | 60 |
| $0.60 | 80 |
| $0.70 | 100 |
| $0.80 | 120 |
| $0.90 | 140 |
| $1.00 | 160 |

#### Demand Table (same as before):
| Price | Quantity Demanded (Qd) |
|-------|------------------------|
| $0.50 | 100 |
| $0.60 | 90 |
| $0.70 | 80 |
| $0.80 | 70 |
| $0.90 | 60 |
| $1.00 | 50 |

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✔ How to Plot Supply & Demand Together:

- X-axis: Quantity (from 0 to 180)
- Y-axis: Price ($0.50 to $1.00)

#### Plot the following:

1. Supply Curve (Qs):
- Points: (60, 0.50), (80, 0.60), (100, 0.70), (120, 0.80), (140, 0.90), (160, 1.00)
- This will be an upward-sloping line.

2. Demand Curve (Qd):
- Points: (100, 0.50), (90, 0.60), (80, 0.70), (70, 0.80), (60, 0.90), (50, 1.00)
- This will be a downward-sloping line.

#### Find the Equilibrium:
Where Qs = Qd?

Look for matching quantities at same price:

- At $0.70: Qs = 100, Qd = 80 → not equal
- At $0.80: Qs = 120, Qd = 70 → no
- Wait — let’s check if any point matches.

Actually, let's compare side-by-side:

| Price | Qs | Qd |
|-------|------|------|
| 0.50 | 60 | 100 |
| 0.60 | 80 | 90 |
| 0.70 | 100 | 80 |
| 0.80 | 120 | 70 |
| 0.90 | 140 | 60 |
| 1.00 | 160 | 50 |

No exact match? Let’s find where they cross.

But notice: At $0.70, Qs = 100, Qd = 80 → excess supply

At $0.60, Qs = 80, Qd = 90 → excess demand

So equilibrium must be between $0.60 and $0.70.

Let’s interpolate:

Try $0.65:
- Assume linear relationships.

From $0.60 to $0.70:
- Qs increases from 80 to 100 → +20 per $0.10 → at $0.65 → Qs = 90
- Qd decreases from 90 to 80 → -10 per $0.10 → at $0.65 → Qd = 85

Still not equal.

At $0.68:
- Qs ≈ 80 + (0.08/0.10)*20 = 80 + 16 = 96
- Qd ≈ 90 - (0.08/0.10)*10 = 90 - 8 = 82

Still not equal.

Wait — maybe there's a typo or rounding.

Alternatively, the closest intersection is near $0.70, but no exact equilibrium in this table.

But wait — actually, let's recheck:

Is there a price where Qs = Qd?

No — so the equilibrium is not at one of these discrete points.

But perhaps we're meant to plot the curves and estimate.

However, let’s double-check the data.

Wait — look again:

At $0.70: Qs = 100, Qd = 80 → too much supply

At $0.60: Qs = 80, Qd = 90 → too much demand

So equilibrium must be between $0.60 and $0.70.

Let’s suppose:

Let’s assume both curves are linear.

Set up equations.

#### Demand Curve Equation:
Points: (100, 0.50), (90, 0.60)

Slope = (0.60 - 0.50)/(90 - 100) = (0.10)/(-10) = -0.01

So:
P = -0.01(Qd) + b
Use (100, 0.50):
0.50 = -0.01(100) + b → 0.50 = -1 + b → b = 1.50

So: P = -0.01Qd + 1.50

#### Supply Curve Equation:
Points: (60, 0.50), (80, 0.60)

Slope = (0.60 - 0.50)/(80 - 60) = 0.10 / 20 = 0.005

P = 0.005Qs + b
Use (60, 0.50):
0.50 = 0.005(60) + b → 0.50 = 0.30 + b → b = 0.20

So: P = 0.005Qs + 0.20

Now set P equal:

-0.01Q + 1.50 = 0.005Q + 0.20
1.50 - 0.20 = 0.005Q + 0.01Q
1.30 = 0.015Q
Q = 1.30 / 0.015 = 86.67

Then P = 0.005(86.67) + 0.20 = 0.4333 + 0.20 = $0.6333

So equilibrium at approximately:
- Price: $0.63
- Quantity: 87 units

This is not listed, but it’s where the curves intersect.

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✔ Final Answer Summary:

#### 1. Definitions:
- Law of Demand: As price increases, quantity demanded decreases (ceteris paribus).
- Law of Supply: As price increases, quantity supplied increases (ceteris paribus).

#### 2. Graphing Instructions:
- Axes:
- X-axis: Quantity
- Y-axis: Price
- Plot three demand curves (original, income ↑, taste ↓) with different colors.
- Plot supply and demand curves separately on the second graph.
- Supply curve: upward sloping
- Demand curve: downward sloping
- Intersection: Equilibrium at ~$0.63, 87 units (not exactly on the table)

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🖼️ Visual Guide (Text-Based Representation)

```
Price ($)
1.00 | S
| /
| /
| /
| /
| /
| /
| /
| /
| /
|/______________________ Quantity
0 50 100 150 200
```

- S: Supply curve (upward)
- D: Demand curve (downward)
- Crossing point: ~$0.63, Q=87

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✔ Conclusion

You should now:
1. Fill in definitions.
2. Draw axes labeled correctly.
3. Plot three demand curves (different colors).
4. On the second graph, draw supply and demand curves.
5. Mark the equilibrium point where they cross (~$0.63, 87).

Let me know if you'd like a printable version or a digital graph!