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Supply and demand practice!

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#1 You are a tailor. Youve just learned that the fabric company you normally buy from is going out of business. Drat! That was the cheapest supplier out there! I will have to raise prices. I will have to lower prices.

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Well done for #1! You will have to raise prices. Continue

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Sorry, thats not right for #1. You will have to raise prices because your production costs have now increased. Continue

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#2 You live near a small village in Connecticut. It gets pretty cold in the winter there, and home heating oil (HHO) is the only method you have for heating your home. For me, the price of HHO is inelastic. For me, the price of HHO is elastic.

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Well done for #2! Home heating oil is inelastic (youll pay for it regardless of the price): Inelastic is Important. Continue

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Sorry, thats not right for #2. Home heating oil is inelastic (important!) Continue

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#3 What does this curve mean? Decreased demand Increased demand

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Well done for #3! Right shift = increased demand Continue

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Sorry, thats not right for #3. Right shift = increased demand Continue

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#4 If a seller has selected a price at P S (see the word ceiling) they are creating a Surplus Shortage

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Well done for #4! A price below E is a shortage (Q S