Question

Use the supply and demand schedule below to answer the following questions: Price Quantity Supplied $20 60 25 Quantity Demanded 100 90 80 70 30 35 70 80 90 100 40 60 es Instructions: Enter your answers as whole numbers. a. What is the market equilibrium price and quantity? Market equilibrium price: $0 Market equilibrium quantity units Next > 4 of 7 b. If there is a shortage of 20 units, what is the market price? < Prev

Answer 1

Answer

Price	Quantity Demanded	Quantity Supplied
$20	100	60
$25	90	70
$30	80	80
$35	70	90
$40	60	100

a. The market equilibrium price is the price at which the quantity demanded in the market, and quantity supplied in the market are same.

So, from the table above, we can say the following about the equilibrium price and quantity;

Market equilibrium price: $30

Market equilibrium quantity: 80

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b. $25

In case of shortage in the market, the quantity demanded is greater than the quantity supplied in the market.

Now, if there is a shortage of 20 units, from the table, we see that the quantity demanded is then 90 units, and quantity supplied is 70 units.

When quantity demanded is 90 units, and quantity supplied is 70 units, the market price is then $25.

So, if there's a shortage of 20 units, market price is $25.

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c. At a price of $35, the quantity demanded is 70 units, and quantity supplied is 90 units. So quantity supply is 20 units (90 - 70 = 20) more than the quantity demanded. It creates surplus in the market.

At a price of $35, the market experiences a surplus of 20 units.

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