Question

4. T he following table shows the market for wool in the economy of Odessa (quantities are in tonnes per year). Price (S) Price($ Quantity Demanded 100-200 300-400-500-T600-700 160 140 1020- 100-180-60-40 1800170011 60 40 Quantity Supplied 10 20 30 40 50 60 70 a) Plot the demand and supply curves on the graph below and label them D1 and S1. [4 marks] 900 800 700 600 500 은 400 300 200 100 20 40 60 80 100 120 140 160 Quantity of wool b) If the economy is currently in equilibrium, what is the price and quantity traded of wool? [1 mark] c) If there is a surplus of 30 tonnes of wool, what is the price and quantity traded of the wool? [1 mark] d) If there is a shortage of 30 tonnes of wool, what is the price and quantity traded of the wool? [1 mark] e) Suppose that supply were to increase by 60 tonnes. Draw the new supply curve on the graph above and label it S2. [2 marks]

I have the answers for A, B, C, D, and E. Please answer F):

F) What is the new equilibrium price and quantity? (1 mark)

Thank you.

Answer 1

(F) When supply increases by 60 at every price, new demand-supply schedule is as follows.

Price ($)	100	200	300	400	500	600
Quantity Demanded	160	140	120	100	80	60
Quantity Supplied (Old)	10	20	30	40	50	60
Quantity Supplied (New)	70	80	90	100	110	120

In equilibrium, quantity demanded equals quantity supplied, therefore

New equilibrium quantity = 100

New equilibrium price = $400