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Supply and Demand Worksheet
Graph 1
The graph below shows supply and demand curves for the Furby market before Furby toys were popular.
$35
Price
$15
$0
Quantity
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1a. In your own words, explain the concepts of "supply" and "demand." The 'Supply' or the quantity supplied on the market is the number of goods or services producers are willing to sell on the market at a given price. If the price on a given good or service is high, producers are willing to produce and sell more; and if that price is low, producers are producing and will to sell less.
The 'Demand' or the quantity demanded on the market is the number of goods or services
buy more of that good or service and if the price is high, consumers will buy less of that good or service.
1b. In the above graph, what does the blue line represent? What does the red line represent? The 'Blueline' in the above graph represents the Supply curve; it is a combination of different points composed by different prices with their different quantities. What comes out is that when the prices increase the quantities supply increases as well. Therefore, we conclude that a positive relationship between the price and the quantity supplied. This line is upward during the positive relationship between prices and quantities.
The 'Redline' in the above graph represents the Demand curve; it is a combination of different points made of different prices with their different quantities. When the prices of goods and services increase, the quantity demanded decreases and when the prices go down, the quantities increase. Therefore, we have an inverse relationship between the price and the
quantity demanded. This explains why the line is downward.
1c. What is the space on the graph between the blue, green and red lines called? What does it represent?
space represents the price beyond the equilibrium point. At this price, the producer is
selling at high price and more quantity than what is required by the equilibrium point
in the market.
1d.Define "equilibrium point" in your own words. What does the equilibrium point determine?
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T SOUTH
PSHIREUNIVERSITY
The 'Equilibrium Point' is a point whereby, graphically speaking, the price and the number of goods and services offered by the producers on the market are equal to the price and the number of goods and services consumers are willing to buy. In other words, at the equilibrium point, the consumers and the producers are all ok with the prices and the quantities on the market
1e. Estimate the equilibrium point in the above graph.
Given the information in the Graph 1, we estimated the equilibrium point at the price of $25 and the quantity of 500 unities.
Graph 2
Sketch a graph of supplyffandffdemand curves that depict the holiday season when the Furby craze took off, but Fur