Question

12. Market equilibrium and disequilibrium The following graph shows the monthly demand and supply curves in the market for teapots Use the graph input tool to help you answer the following questions. Enter an amount into the Price field to see the quantity demanded and quantity supplied at that price. You will not be graded on any changes you make to this graph Graph Input Tool Market for Teapots 72 Price (Dollars per teapot) Su 24 64 Quantit Demanded (Teapots) Quantity Supplied (Teapots) 500 150 56 48 40 Demand 32 으24 16 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Teapots)

Answer 1

In the market, the equilibrium price rate is the one at which quantity demanded equals quantity supplied. This implies the equilibrium price is $40 and equilibrium quantity is 250 teapots At S48, the quantity demanded is 125 teapots and quantity supplied is 300 teapots. Hence there a surplus of 175 teapots and a downward pressure on the price At $32, the quantity demanded is 300 teapots and quantity supplied is 125 teapots. Hence there is a shortage of 175 teapots and an upward pressure on the price rate