Economic

Problem Set #3 ECON 2206 11 points.

Supply & Demand, Equilibrium, Shifting Curves

1. The table below shows the quantity of roller coaster tickets demanded every 15 minutes and the quantity of roller

coaster tickets supplied every 15 minutes for the Steel Vengeance roller coaster at Class Action Park.

a. Plot two lines on the following graph using the data in the table below. Be sure to mark out the units for

each variable in consistent amounts corresponding with each line. First, pair Price data and Quantity

Demanded data, plot those 5 points on the graph and draw a line connecting them. Next, pair Price data

and Quantity Supplied, plot those 5 points and draw a line connecting them. Label supply curve with S1 and

the demand curve with D1.

Table 1

b. How is the supply curve different from other supply curves we have worked with so far? Why might this

supply curve look like the one you’ve drawn? Explain your answer in the context of this problem.

c. What are the equilibrium price and quantity of the tickets? Label with E1.

d. Suppose that each roller coaster car holds 10 folks and the owner of the park purchases eight more cars and

puts them on the coaster. Is this a demand event or a supply event? (You may want to change the data in

your table to reflect this change to find the new points to plot.) Draw any new demand or supply curves

Price Quantity Demanded Quantity Supplied

$1 200 80

$2 160 80

$3 120 80

$4 80 80

$5 40 80

Price

Tickets

that results on your original graph and identify the new equilibrium with E2. Estimate the new equilibrium

price and quantity.

e. Suppose mechanics find that all eight of the cars in part c have faulty couplers so they have to remove the

cars from the roller coaster. Also, unfortunately, Class Action Park is getting a reputation of being very

dangerous and the Department of Health no longer allows people under the age of 18 to attend. Suppose

that people under the age of 18 have the following demand schedule for roller coaster rides at Class Action

Park:

Table 2

Price Quantity Demanded

$1 60

$2 50

$3 40

$4 30

$5 20

Using the mechanical information and Table 2, adjust Table 1 to reflect these changes. What is the new

equilibrium price and quantity of tickets? Make a sketch of any new curves and identify the new

equilibrium E3 on your original graph. (Putting all of these graphing changes on one graph makes it easy

for me to grade your paper.)

2. Clearly explain the difference between an “decrease in quantity demanded” and an “decrease in demand.” You may

include a picture in your explanation, but be sure that you explain in words what is happening in the picture.