Demand and Supply Theory

Demand and Supply Theory

You must use Microsoft Word (MS Word) to create and draw the graphs. For those of you who have never the software to do this, I posted a link to two YouTube videos in Chapter 3 module on Canvas titled (a) Using MS Word to Draw Econ Graphs (Part 1), and (b) Using MS Word to Draw Econ Graphs (Part 2) which should sufficiently train you in how to go about using the software.


  • First draw the graphs by hand before attempting to draw them with the software.
  • Neatness, accuracy, completeness and timeliness count on this assignment.

When you draw your graphs for this homework assignment make sure that you reference the graph in your answer and that the graph has all these elements.

  • I like big graphs and I cannot lie … so make sure that your graph covers about one third of the page.
  • Presentation matters: Make sure that your entire graph fits on one page. I will give you a zero if your graph is split on two pages.
  • An appropriate label such as Figure 1, Exhibit 1 etc…
  • The graph should have an appropriate descriptive title
  • Make sure that you label both the Y-axis, and the X-axis using the correct units of measurement such as dollars ($), years etc…
  • If you are demonstrating a shift / change in demand or supply, use dashed lines to differentiate between the original and new position.
  • Graphs are for show and tell, so make sure that you reference the graph in your answer. For example, you can say something like, as shown in Exhibit 1 …. Refer to your textbook for other appropriate examples.
  • Add page numbers to your homework except on the cover page

3). Before answering the question, restate it. Make sure that you have answered the question in its entirety.



Question #1: Using demand and supply curves, diagrammatically demonstrate what happens to the equilibrium price and quantity when:


  1. An increase in demand that is greater than the increase in supply?
  2. Demand falls and supply is constant


Question #2: Use a demand/supply curve or both to graphically demonstrate the following:

  1. The demand for automobiles when the price of gasoline rises sharply and stays high.
  2. The supply of computers if a tax is placed on the production of computers.


Question #3: Without drawing a graph, identify whether the demand curve will shift rightward or leftward:

  1. A decrease in the number of buyers
  2. A rise in the price of substitutes

Question #4: Using an appropriate demand or supply curve, demonstrate and explain the economics (if any) in the following observation:

“When fines for driving over the speed limit were $100, the Chula Vista, CA Police department issued on average about 500 speeding tickets. However, when the city council raised the fine for speeding to $250 only 215 tickets were issued.”

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