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?

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

4. 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.

5. 3.

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

   • 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
   • When supply rises, the price falls, and the cases show this in each of the four that raise supply
   • Quantity rises whenever supply rises, since more supply means more is sold in any case
6. 4.

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

   • Case 3: supply rises by more than demand, so price falls and quantity is steady at 350
   • Case 1: the shifts are equal, so the price and the quantity both stay as they were
   • 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
7. 5.

   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 falls to $20 and quantity to 350, as in case 4, since supply rose by 100 in both
   • Price falls to $25 and quantity rises to 400, since supply grew by more than demand
   • Price rises to $35 and quantity to 350, as in case 2, since demand rose in both
   • Price stays at $30 and quantity rises to 450, since the two shifts simply add
8. 6.

   A student claims that when price and quantity both rise, only demand shifted. Noah tests the claim against the cases. What is the verdict?

   • Supported: a supply increase lowers the price, so supply cannot have shifted in that case either
   • Not supported: price and quantity cannot rise together under any kind of shift
   • Not supported: in case 2 price and quantity both rose, yet supply shifted right by 100 as well
   • Supported: case 2 shows demand shifted, and that is the lone change that raises price

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 $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
    • Buyers pay $7, down from $8, and growers receive $9, up from $8: the $2 splits evenly
11. 8.

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

    • 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 $100 and the gains are $100, since the subsidy just moves money to the buyers and growers
    • 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
    • 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
    • Right: the government pays $2 on each bushel, so growers receive $2 more a bushel
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
    • Neither side would change, since elasticity matters for taxes and not for subsidies paid to growers
    • 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