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.

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

   • $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
   • $20: $1 x 20 rides, since the price rises $1 for each ride that no longer sells
   • $40: a triangle of 20 lost rides, with a $4 gap at the first lost ride that shrinks to $0
3. 2.

   Esme compares riders' and drivers' surplus before and after the 30-ride limit. Which statement is best supported?

   • Both groups lose, since 20 rides disappear from the market and no one gets them
   • Riders lose $40 and drivers gain $40, so the limit costs riders and helps drivers equally
   • Riders lose $80, from $125 to $45; drivers gain $40, from $125 to $165; the $40 gap is lost
   • Riders lose $80 and drivers gain $80, so the limit just moves money from riders to drivers
4. 3.

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

   • 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
   • How many riders live in the city, since a larger city has a different deadweight loss
   • Whether riders pay in cash or by card, since the method changes how many rides they want

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?

   • Quantity rises whenever supply rises, since more supply means more is sold in any case
   • 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
   • When both curves shift right, quantity rises in every case, but price depends on the larger shift
7. 5.

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

   • 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
   • 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
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 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 stays at $30 and quantity rises to 450, since the two shifts simply add
   • Price falls to $20 and quantity to 350, as in case 4, since supply rose by 100 in both
9. 7.

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

   • 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
   • Not supported: price and quantity cannot rise together under any kind of shift
   • Supported: a supply increase lowers the price, so supply cannot have shifted in that case either

10. 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.

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 $80 ($2 x 40 bushels), the old quantity, so no surplus is lost
    • It costs $100 and the gains are $100, since the subsidy just moves money to the buyers and growers
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 $1 more a bushel, $9 against $8; buyers get the other $1
    • Not so: growers receive nothing extra, since the price cut goes to the buyers in full
    • 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?

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