Question

Use supply and demand graphs to answer the following two questions. Your submitted response to this Discussion Topic does not need to include the graphs, but your response should describe the outcome as indicated by the questions below. However, you should practice drawing the graphs both to help you get the answers, and because in the final exam you will need to be able to graph shifts in supply and/or demand, and explain the outcomes.

Question 1.  Draw a supply-and-demand graph for minivans to show the effect of a strike by steel workers that raises steel prices. Does this result in a supply shift, demand shift, or both? Why? What happens to equilibrium price and quantity for minivans?

Question 2.  The price of sport utility vehicles rises.  Draw a supply and demand graph to show what happens to the market for minivans (not sport utility vehicles). (Hint: consider whether sport utility vehicles and minivans are substitutes or complements, and how the price of one good affects the demand for the other good.) For minivans, does this result in a supply shift, demand shift, or both? Why? What happens to equilibrium price and quantity for minivans?  

Use the examples regarding supply and demand shifts in your textbook and in the assigned videos for this Module to help you answer these questions.  But be sure to understand when and why demand or supply curves shift (and when and why they will not shift). You will need to understand, not just memorize, to do well on your quizzes and final exam.  Also, practice good graphing technique by labeling all curves and your axes appropriately.

Answer 1