Question

1. The demand and supply schedules for a certain good are like follows:

Demand Schedule                                          Supply Schedule

Price $	Quantity	Price $	Quantity
24	150	24	50
26	140	26	60
28	120	28	70
30	110	30	80
32	90	32	90
34	80	34	110
36	70	36	120
38	60	38	140
40	50	40	150

1. Graph and label Demand and Supply.
2. Find the equilibrium price and quantity from the graph.
3. What will happen if the price is set at $35 Please specify the distance and term, also show it on the graph (at that specific price)
4. What will happen if the price is set at $35 Please specify the distance and term, also show it on the graph (at that specific price)

Answer 1

a) Graph is drawn below

Demand and supply Price 40 50 60 70 80 90 120 130 140 150 160 100 110 Quantity Demand Supply

b) At equilibrium demand curve meets supply curve. This gives an equilibrium price of $32 and an equilibrium quantity of 90 units

c) If price is set at $35, it will be acting as a binding price floor. At this price, quantity demanded will be less than quantity supplied and so there will be a surplus of 40 units

Demand and supply Surplus of 40 units Price 40 50 60 70 80 90 120 130 140 150 160 100 110 Quantity Demand Supply

d) same as part c) because question is repeated.