Question

The table below displays information pertaining to the market for milk: TABLE 1 Cartons Per Day Price (dollars per carton) Quantity Demanded 1.00 200 1.25 175 1.50 150 1.75 125 2.00 100 Quantity Supplied 110 130 150 170 190 In this space, please illustrate the market for milk, with both the supply curve and demand curve graphed on the same graph, making sure you label each component and put the correct variables on the x and y-axis.

Answer 1

Page No Price ($ per carton) 3.00 + 2.754 0 2.sof 2.25+ 200+ 1.75 1.50+ - 1.25+ 1.00 - 160 Quantity OILO ID120 130 140 150 170 180 140 200 cartons/

In the above figure, the X-axis depicts the price of milk ($ per carton) while the Y-axis depicts quantity of milk carton.

By using the values provided in the table, we get the downward-sloping demand curve DD and the upward-sloping supply SS. The intersection point of the two curves gives the equilibrium quantity of milk cartons which is 150 and the equilibrium price of milk carton which is $1.50.

Now, if the market price of milk rises to $1.75, the milk market will suddenly be faced with a surplus, or excess supply, which means the quantity supplied is greater than the quantity demanded. Numerically, the excess supply equals 45 cartons of milk.

Explanation: At price equal to $1.75, the quantity demanded is only 125 units of milk cartons whereas the quantity supplied is 170 milk cartons. That is, the quantity supplied is greater than the quantity demanded (170>125) at price $1.75. This results in the excess supply of milk cartons which is equal to 45 (170-125) cartons of milk.