Question

The price of pizza has the following demand and supply schedules

Price	Quantity demanded	Quantity supplied
4	135	26
5	104	53
6	81	81
7	68	98
8	53	110
9	39	121

1. Graph the demand and supply curve (10 points)
2. Indicate the equilibrium price and quantity in this market (5 points)
3. If the actual price were above the equilibrium price, explain (with graph) what would happen? How could the equilbrium be achieved (10 points)
4. If the actual price were below the equilibrium price, explain (with graph) what would happen? How could the equilbrium be achieved (10 points)
5. Explain (with graph) what would happen to equilbrium price and quantity when the Income and population increase? (15 points)

Answer 1

(A)

9000 39,9 53,8 121,9 110,8 98,7 68,7 81,6 Quantity demanded in 53,5 104,5 26,4 135,4 Quantity supplied 0 50 50 100 100 150 150

(B) Equilibrium level at price $6 where quantity is 81 units

(C) When actual price is higher than equilibrium price there is situation occurred where quantity of supply is excess than quantity demanded so for achieved equilibrium level need to reduce the supply by reducing the price of the good.

(D) When actual price is below than equilibrium price there is situation occurred where quantity of demand is excess then quantity of supplied to achieved equilibrium level needs to reduce the demand by increase the price f good.

(E) When income of the population increases then demand curve will shift right side of the graph and equilibrium price and quantity both in increased.