Question

Problem 2 Answer the following questions based on the table below. PriceQuantity Quantity Supplied Per Month S5 $4 $3 $2 Demanded Per Month 6,000 8,000 10,000 12,000 10,000 8,000 6,000 4,000 $1 14,0002,000 Given the table above, graph the demand and supply curves for flashlights. Make certain to label the equilibrium price and equilibrium quantity. What is the equilibrium price and the equilibrium quantity? Suppose the price is currently S5. What problem would exist in the market? What would you expect to happen to price? Show this on your graph. Suppose the price is currently $2. What problem would exist in the market? What would you expect to happen to price? Show this on your graph. a. b. c. d. Problem 3 For each of the following events draw a supply and demand diagram to show a. The price of tacos increases. b. Income falls in town. Assume that hamburgers are a normal good for most people. r asoms and tickets at movie

Answer 1

2(a).

Please find the attached figure.

2(b).

Price Supply $5 $4 Equilibrium $3 $2 Demand $1 Quantity 6000 8000 10000 12000 14000

The equilibrium quantity and price can be found at a point where quantity demanded equals quantity supplied.

Here at price $4, quantity demanded equals to quantity supplied.

So, we can say that the equilibrium quantity is 6000 per month and price is $4.

2(c).

Suppose the price is currently $5.

At price $5, quantity demanded is 6000 per month, whereas quantity supplied is 10000 per month.

That means there is excess supply or surplus of 4000 per month.

As a result of surplus, there will be a downward pressure on price. And the pressure remains until the price reaches the equilibrium point.

2(d)

Price SurplusSupply $5 $4 Equilibrium $3 $2 Demand $1 Quantity 6000 8000 10000 12000 14000

Suppose the price is currently $2.

At price $2, quantity demanded is 12,000 per month, whereas quantity supplied is 4,000 per month.

That means there is excess demand or shortage of 8,000 per month.

As a result of the shortage, there will be a upward pressure on price. And the pressure remains until the price reaches the equilibrium point.

Price Supply $5 $4 Equilibrium $3 $2 Shortage Demand $1 Quantity 6000 8000 10000 12000 14000