Question

Construct a vertical axis (rise axis) and a horizontal axis (run axis). Assign a value of 0 (zero) where they meet.

On the vertical axis list the following prices from bottom to top: $2, $4, $6, $8, $10, $12, and $14

On the horizontal axis list the following quantities from left to right: 10, 20, 30, 40, 50, and 60

Plot the data below on your graph, and answer the following questions: 1. At what price does equilibrium occur? 2. At what prices do surpluses occur? 3. At what prices do shortages occur?

Price $            Quantity Demanded      Quantity Supplied                              

14                            0                                    60                                            

  12                           10                                   50

  10                           20                                   40

    8                           30                                   30

    6                           40                                   20

    4                           50                                   10

    2                           60                                     0

Do not submit your graph, only the answers.

Answer 1

a) Equilibrium is a point where the demand and the supply are equal .that is at the price of 8. here, the quantity and the demand both are equal to 30.

b) A surplus will occur when the supply is more than the demand in the market. Any price above the equilibrium will lead to a surplus. That is at the price above $8 the supply will be higher than the demand leading to a surplus.

c) A shortage will occur the demand is greater than the supply. It will occur then the price is lower than the equilibrium. That is at price below $8 there will be a shortage in the market.