Question

12. Market equilibrium and disequilibrium 

The following graph shows the monthly demand and supply curves in the market for shirts. 

Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. 

Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. 

The equilibrium price in this market is $_______  per shirt, and the equilibrium quantity is _______ shirts bought and sold per month.

 

Complete the following table by indicating at each price whether there is a shortage or surplus in the market, the amount of that shortage or surplus, and whether this places upward or downward pressure on prices. 

Answer 1

Equilibrium price in this market = $50 per shirt

Equilibrium quantity = 250 shirts bought and sold per month.

Equilibrium in the market is reached at the point where demand & supply curves intersect with each other. At this point the price is $50 per shirt & the quantity is 250 shirts.

When price is below the equilibrium price, shortage occurs in the market as quantity demanded exceeds quantity supplied. When price is $40, quantity demanded is 375 shirts while the quantity supplied is 225. Therefore, there is a shortage of 150 shirts. So, there is a pressure on price to increase. When price is above equilibrium price, surplus occurs in the market as quantity supplied exceeds quantity demanded. When price is $60, quantity demanded is 125 shirts while the quantity supplied is 275. Therefore, there is a shortage of 150 shirts. So, there is a pressure on price to decrease.

Price (Dollars per shirt)	Shortage or Surplus	Shortage or Surplus Amount (Shirts)	Pressure
40	Shortage	150	Upward
60	Surplus	150	Downward

Answer 2

The equilibrium price in this market is $50 per keyboard where demand equals supply and the equilibrium quantity is 250 keyboards bought and sold per month.

Price (Dollars per keyboard)	Shortage or surplus	Shortage or surplus amount (Keyboards)	Pressure
40	Shortage	(360-230)= 130	Upward because quantity demanded exceed quantity supplied.
60	Surplus	(270-125)= 145	Downward because quantity supplied exceeds quantity demanded.

Answer 3

The equilibrium price in this market is $50 per keyboard where demand equals supply and the equilibrium quantity is 250 keyboards bought and sold per month.

Price (Dollars per keyboard)	Shortage or surplus	Shortage or surplus amount (Keyboards)	Pressure
40	Shortage	(360-230)= 130	Upward because quantity demanded exceed quantity supplied.
60	Surplus	(270-125)= 145	Downward because quantity supplied exceeds quantity demanded.