Supply: the supply curve and what shifts it

Grade 12 Social Studies Worksheet - Challenge Me

Circle the best answer.

1. Read this first

   Use this

   Taxi rides in an example city (example figures, made up for practice). Columns: Price per ride, Rides wanted a day, Rides offered a day. $2, 80, 20; $3, 70, 30; $4, 60, 40; $5, 50, 50; $6, 40, 60; $7, 30, 70; $8, 20, 80. The lines are straight: riders want 0 rides at $10 and drivers offer 0 at $0. Producer surplus is the area between the price and the supply line; consumer surplus is the area between the demand line and the price. A rule may limit rides to 30 a day, with the 30 licenses going to the drivers with the lowest costs. Deadweight loss is surplus that disappears because trades stop.

2. 1.

   Ari finds the drivers' producer surplus at the free-market price. Which answer is right?

   • $500: $10 x 50 rides, since the surplus runs up to the $10 limit on the demand line
   • $62.50: half of $5 x 25 rides, since just half of the rides leave drivers a gain
   • $125: half of $5 x 50 rides, the triangle between the $5 price and the supply line
   • $250: $5 x 50 rides, since producer surplus is the whole revenue that drivers collect
3. 2.

   A rule limits rides to 30 a day. Bo finds the deadweight loss. Which answer is right?

   • $40: a triangle of 20 lost rides, with a $4 gap at the first lost ride that shrinks to $0
   • $0: the price rises, so what the drivers gain equals what the riders lose
   • $80: $4 x 20 rides, since the gap between riders' value and drivers' cost is $4 for each lost ride
   • $20: $1 x 20 rides, since the price rises $1 for each ride that no longer sells
4. 3.

   Jun asks which condition, if it changed, would most change the $40 deadweight loss. Which is it?

   • Whether riders pay in cash or by card, since the method changes how many rides they want
   • How many riders live in the city, since a larger city has a different deadweight loss
   • Which drivers get the licenses: if higher-cost drivers held them, the loss would be larger
   • Whether fares are posted in dollars or in cents, since the unit changes the size of the loss

5. Five market outcomes (example figures, made up for practice)

   Case	Demand shift at each price	Supply shift at each price	New price	New quantity
   Before	none	none	$30	250
   1	+100	+100	$30	350
   2	+200	+100	$35	400
   3	+50	+150	$25	350
   4	-100	+100	$20	250

   Each case shifts the curves from the same starting market. A shift is a change in the quantity at every price.

6. 4.

   Kira reads the cases for a general pattern. Which claim do they support best?

   • When supply rises, the price falls, and the cases show this in each of the four that raise supply
   • When both curves shift right, quantity rises in every case, but price depends on the larger shift
   • When demand rises, the price rises, and the cases show this in each of the three that raise demand
   • Quantity rises whenever supply rises, since more supply means more is sold in any case
7. 5.

   Luz looks for the case where the price falls but the quantity does not change. Which case is it, and why?

   • Case 1: the shifts are equal, so the price and the quantity both stay as they were
   • Case 3: supply rises by more than demand, so price falls and quantity is steady at 350
   • Case 2: demand rises by more than supply, so price falls but quantity still holds
   • Case 4: lower demand and higher supply both cut the price, and their quantity effects cancel
8. 6.

   A new case raises demand by 100 and supply by 200 at each price. Milo predicts the result from the pattern and the starting market. Which is best?

   • Price stays at $30 and quantity rises to 450, since the two shifts simply add
   • Price rises to $35 and quantity to 350, as in case 2, since demand rose in both
   • Price falls to $25 and quantity rises to 400, since supply grew by more than demand
   • Price falls to $20 and quantity to 350, as in case 4, since supply rose by 100 in both

9. A grain market with a $2 subsidy to growers (example figures, made up for practice)

   Price buyers pay	Bushels wanted	Bushels offered before	Bushels offered with the subsidy
   $4	80	0	20
   $5	70	10	30
   $6	60	20	40
   $7	50	30	50
   $8	40	40	60
   $9	30	50	70
   $10	20	60	80

   The government pays growers $2 on each bushel, so growers receive the buyers' price plus $2. The lines are straight: buyers want 0 at $12 and growers offer 0 at a $4 price. In our words: the side that responds less to price gets more of a subsidy, as with a tax.

10. 7.

    Pia finds the new market outcome. Which statement about the $2 subsidy is best supported?

    • Buyers pay $8 and growers receive $10, so the growers keep the whole $2 and sales rise to 60
    • Buyers pay $7, down from $8, and growers receive $9, up from $8: the $2 splits evenly
    • Buyers pay $6 and growers receive $8, so the whole $2 goes to buyers and sales rise to 60
    • The price stays at $8 and sales rise to 60, since growers offer 60 bushels at that price
11. 8.

    Ren weighs the subsidy's cost against the gains. Which statement is best supported?

    • It costs $100 and the gains are $100, since the subsidy just moves money to the buyers and growers
    • It costs $100 and buyers alone gain $90, so the growers gain nothing from the subsidy
    • It costs $100 ($2 x 50 bushels), buyers and growers gain $90 together, and $10 is lost
    • It costs $80 ($2 x 40 bushels), the old quantity, so no surplus is lost
12. 9.

    A farm group says the subsidy raises growers' income by $2 a bushel. Tala tests the claim. What is the verdict?

    • Right: growers sell 10 more bushels at $2 more, so each bushel brings $2 more
    • Right: the government pays $2 on each bushel, so growers receive $2 more a bushel
    • Not so: growers receive nothing extra, since the price cut goes to the buyers in full
    • Not so: growers receive $1 more a bushel, $9 against $8; buyers get the other $1
13. 10.

    Suppose buyers' demand were much less elastic than growers' supply. Zee predicts who would get more of the $2. Which is best?

    • Growers would get more, since they produce the grain and the subsidy is paid to them
    • Buyers would get more: the less responsive side gets more of a subsidy, as with a tax
    • Each side would get the same, since the subsidy is a fixed $2 on each bushel sold
    • Neither side would change, since elasticity matters for taxes and not for subsidies paid to growers