Question

1. Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as shown in the table below. Thousands of Bushels Demanded Price Thousands of Bushels Supplied 85 $3. 70 80 $ 4 80 75 $ 5 90 70 $6 100 65 $ 7 110 60 $ 8 120 a. What is the equilibrium price? b. At what price is there neither a shortage nor a surplus? c. Fill in the surplus-shortage column d. Graph the demand for wheat and the supply of wheat. Be sure to label the axes of your graph correctly. Label equilibrium price P and equilibrium quantity Q.

Answer 1

a). The equilibrium is where the quantity demanded and the quantity supplied were equal, here the equilibrium price is $  $4$.

b). At the equilibrium price there is neither a shortage or surplus for the product, the quantity demanded will be always be equal to quantity supplied. At a price of $ 4 there is neither shortage or surplus.

c). A shortage is when the quantity demanded is excess of the quantity demanded, like wise the a surplus occurs when the quantity supplied is greater than the quantity demanded.

PRICE surplus/shortage OD QS shortage equilibrium 3 85 70 4 80 80 surplus 75 90 6 70 100 surplus surplus 7 65 110 surplus 8 60 120

9 8 7 Price 6 5 QD 4P 3 2 1 0 0 20 40 60 80 100 120 140 Quantity