Question

By also graphing

10、The table shows the demand and supply schedules for running shoes, what is the market equilibrium? If the price is $70 a pair, describe the situation in the market. Explain how market equilibrium is restored. If a rise in income increases the demand for running shoes by 100 pairs a day at each price, explain how the market adjusts to its new equilibrium. Quantity (dollarsdemanded upplied Price per pair) 70 Quantity (pairs per day) 1000 400 500 600 700 800 900 900 800 90 100 110 700 600 500

Answer 1

Kindly refer the below attached picture

120 100 80 60 Demand 40 Supply 20 New Demand 200 400 600 800 1000 1200 Quantity

The market is said to be at equilibrium when the quantity demanded is equal to the quantity supplied. From the above graph it is visible that at a price of $90 per unit the quantity demanded is equal to the quantity supplied. At this price quantity demanded is equal to 700 units and is equal to quantity supplied.

When the price is $70 per pair then the quantity demanded is greater than the quantity supplied this it will create is shortage in the market which will increase the market price towards the equilibrium price. Like this the market restores the equilibrium.

Due to increase in income the demand curve will shift to its right there for the equilibrium price would be higher than the previous equilibrium price. From the above graph it is visible that the new equilibrium price is greater than the previous price. The quantity demanded also increases with the increase in income.

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