Graphing Exercise: Supply and Demand

In highly competitive markets, large numbers of independent consumers and firms come together to buy and sell standardized products. Here, market prices are determined by their decisions regarding how much to buy or sell at various prices. In this exercise, you will discover how demand and supply interact to determine the market price and the quantities bought and sold. Exploration: How do changes in supply or demand affect equilibrium price and quantity?

Exploration: How do changes in supply or demand affect equilibrium price and quantity?


Consider the market for corn as summarized in the graph.  Currently, the market is in equilibrium – neither surplus nor shortage – at a price of $3 per bushel with 7 thousand bushels being bought and sold per week.  Using the interactive graph, you can predict the impact on market price and quantity of changes in conditions affecting the corn market.  To use the graph, shift either the supply or demand curve by clicking on the curve’s label and, holding down the left mouse button, dragging the curve to the new location.  Once the curves are in place, release the mouse button and click on the New Equilibrium button to observe the changes in price and quantity.

  1. What is the likely effect on equilibrium price and quantity if corn farmers experience an extended period of bad weather?
    See answer here
  2. What is the likely effect on the equilibrium price and quantity of corn if the government requires that ethanol (a corn byproduct) be added to all gasoline in order to reduce carbon emissions?
    See answer here
  3. Suppose both of the above incidents occur – bad weather and a government ethanol mandate?  How will the corn market be affected?
    See answer here
  4. Experiment on your own:  drag either the supply curve, the demand curve, or both, followed by clicking the New Equilibrium button.  What generalizations can you draw with respect to changes in equilibrium price and quantity?
    See answer here