Question

Supply and Demand Data for Ice Cream (one gallon containers) Price OD QS OD1 $2.00 700 300 $2.50 600 400 $3.00 500 500 $3.50 400 600 $4.00 300 700 $4.50 200 800 Graph the data in the blank space above. Make sure to label P, Q, S, D, andE What is the Equilibrium Price and Quantity? At a price of $2.00, there will be a At a price of $4.00, there will be a Now suppose the price per gallon of frozen yogurt (a substitute good) increases resulting in an increase in the quantity demanded for ice cream by 200 gallons at each given price. Write the new values of the QD at each given price in the QD1 column above. Now graph the new QD values for the new Demand Curve. Make sure to label D1 and E1 What is the new Equilibrium Price and Quantity? In what direction did the demand shift? Is this referred to as an increase or decrease in demand? In the space below, define Nominal GDP and Real GDP. Which one is the better measure of GDP and why? 1. 2. 3. 4. 5. of of 6. 7. 8. 9.

Answer 1

(1)

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(2)

The equilibrium price and quantity will be determined by the intersection of Quantity demand and quantity supply curve.

Equilibrium price=$3

quantity=500

3.

At price $2, there will be a excess demand of 400 units.(700-300=400).

4.

At price $4, there will be a excess supply of 400 units.(700-300=400).