In the sale of goods and services, price is determined by the interaction between supply and demand. In a graph, the point where the supply curve and demand curve intersect is called the equilibrium point. This point corresponds to the equilibrium price, the one a business should seek to charge. If suppliers charge a price higher than equilibrium, a surplus will result. If they charge less than equilibrium, a shortage will result. Supply curves and demand curves can shift as a reaction to other events in the marketplace; we can recognize the shift as an increase or decrease based on the left or right movement of the curve. When a curve shifts, the equilibrium point (price) also shifts.

Assignment

To complete this assignment, you will need to review the video in the lesson and be familiar with how to properly graph supply and demand together without real numbers. You will not use actual values for price and quantity in this task. Instead, you will draw a graph to model real-life scenarios. (Be sure to view the example below the assignment directions.)

Demand (TRIBE) Supply (ROTTEN)
Select one:
"As more Americans hold on to older vehicles longer, oil and tire change service shops see boom in profits."

"Influencers claim orange juice cured their insomnia; claim leaves doctors scratching their heads and store cases looking bare."

"U.S. birthrate continues to drop, signaling a colicky future for makers of baby products."
Select one:
"Semiconductor chip shortage woes: automobile manufacturers warn of delays in production and higher prices."

"Safer, faster milk for less: dairy leaders describe improved production process."

"Social media campaigns increase shelter adoptions; breeders report giving up the puppy business."


Draw your graphs. Draw a basic market graph for each headline you chose. You should have two graphs, where each focuses on one product market. Title each graph with the market for the product affected in your news headline, such as "Market for Orange Juice." In each graph, label the axes, curves, equilibrium price "Pe," and equilibrium quantity "Qe."

Note: The headlines you chose might reference or imply more than one good or service. However, you will interpret the impact on just one product market for each headline. As long as your graphs are reasonable for your chosen headlines, your work should be acceptable.

Add the shift in each graph. Draw a new curve on each of your graphs to reflect the shift in either supply or demand. Label it D1 or S1, accordingly. Label the new equilibrium price P1 and the new equilibrium quantity Q1. Add arrows to show the direction of the changes in the curve, price, and quantity.

Explain the outcomes. In a complete paragraph for each graph, explain how your graph illustrates the news event. Describe what changed and why. Include the one element of either TRIBE or ROTTEN that best explains the shift. Describe how this led to the market outcomes for equilibrium price and quantity. You will have two paragraphs, one for each graph.