Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled
diagram must have all axes and curves clearly labeled and must show directional changes. If the
question prompts you to "Calculate," you must show how you arrived at your final answer.
Assume gadgets are sold in a competitive market, the equilibrium price is $6, and the equilibrium
quantity is 500 units.
(a) Using the numerical values above, draw a correctly labeled graph of the market for gadgets and
show each of the following.
(i) The equilibrium price
(ii) The equilibrium quantity
(b) At a price of $8 per unit, will there be a surplus or a shortage in the market? Explain.
(c) Assume gadgets now become more popular. On your graph in part (a), show the effect of the
increase in gadgets' popularity on the equilibrium price and quantity of gadgets.
(d) Assume instead there is an increase in the price of tin, a major input in producing gadgets. What will
be the effect of an increase in the price of tin on the market for gadgets?
(e) If both changes in part (c) and part (d) occurred simultaneously, will the equilibrium quantity of
gadgets increase, decrease, remain unchanged, or be indeterminate? Explain.