Question

12. Price Adjustment - Instructions: Read the scenarios below. If a shift in demand and/or supply has taken place, identify whether a surplus or a shortage now exists. Finally, graph it and label everything (D1, D2, S1, S2, P1, P2, Q1, Q2, shift arrows, etc), including shortages and surpluses, a) Joe's shoe shop raisest prices from the equilibrium price of $40 a pair to its new price of $60 a pair. (Shoes) b) A small town of 1,000 people increased its population by 2,000. The grocery store raises its prices to match the new equilibrium price point. (Grocery Store goods and services) c) A new fad diet has resulted in soybean madness. Graph the new equilibrium price. (Soybeans) d) Consumer income has risen. Companies that make televisions have invested in better technology to make televisions more efficiently. (Televisions)

Answer 1

Ans) 1) When price is above the equilibrium price, there is surplus i.e quantity supplied exceeds quantity demanded.

When price is below equilibrium price, there is shortage i.e quantity demanded exceeds quantity supplied.

So, here, there will be surplus as price is above equilibrium price.

Surplus 6 Price above equilibrium price Equilibrium Shortage Price below equilibrium / price

surplus - Qe Qs

2) When there is increase in number of consumers, demand increases and demand curve shifts to the right. Both price and quantity increases.

atao Qe Q

3) With increase in popularity of soybean, demand for soybean will increase. Demand curve will shift to the right. Both price and quantity will increase.

atao Qe Q

4) With increase in income, demand will increase and with increase in technology, supply will also increase. As a result, both supply and demand curve will shift to the right. And quantity will increase but change in price will depend upon the magnitude of shift of demand and supply curve.

Price IRI- Quantity

کہ تم راه | --- -- -- -- Qi da Quantity

Price - | a Quantity