Question

Harry Potter goes shopping with Hagrid in Diagon Alley in London. He is looking to buy a uniform for a Hogwarts School of Witchcraft and Wizardry he is just about to enter. Imagine that the uniform market in Diagon Alley is a competitive market represented by the supply and demand represented in the Figure 6a below. (Imagine also that the laws of economics hold in the Harry Potter world. :)) The prices are in knuts, the currency used by the wizard folk. 11 17 27 41 60 8 597 119

Answer 1

At equilibrium price:

There will be 60 uniforms demanded and 60 uniforms provided to the market by the sellers. Quantity sold/bought = 60

Price floor= 146

Law would be binding. Quantity demanded = 11, Quantity supplied = 97

Quantity traded = 11

There would be a surplus of = 97 - 11 = 86 uniforms (supply > demand)

Price floor = 40

Quantity demanded = 60, Quantity supplied = 60

Quantity traded = 60

This law would be non binding