Question

Marlene: Using the following schedule, define the equilibrium price and quantity. Describe the situation at a price of $7. What will occur? Describe the situation at a price of $3. What will occur?

Price ($)	Quantity Demanded	Quantity Supplied
1	1000	120
2	985	200
3	850	315
4	720	400
5	600	450
6	520	520
7	320	650
8	200	718
9	180	825
10	100	997

Answer 1

Equilibrium price will be the price at which quantity demanded equals quantity supplied.
From the table we can see that when,
Price = $6 => Quantity demanded = Quantity Supplied = 520
Therefore, at equilibrium P=$6 Q=520

At P=$7, quantity demanded(Q_d) < quantity supplied (Q_s).
Therefore, there is excess supply of Q_s - Q_d = 650 - 320 = 330 units in the market. Therefore, price has to decrease so that Q_d increases and Q_s decreases and the market reaches at equilibrium.

At P=$3, quantity demanded(Q_d) > quantity supplied (Q_s).
Therefore, there is excess demand of  Q_d - Q_s  = 850 - 315 = 535 units in the market. Therefore, price has to increase so that Q_d decreases and Q_s increases and the market reaches at equilibrium.