problemset_chpt3-2

# problemset_chpt3-2 - PROBLEM SET FOR CHAPTER 3 II(Demand...

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PROBLEM SET FOR CHAPTER 3 – II (Demand, Supply and Market Equilibrium) 1. Consider the following supply and demand model of the world tea market (in billions of pounds). Price per Pound Quantity Supplied Quantity Demanded \$ 0.38 1.500 525 \$ 0.37 1.000 600 \$ 0.36 700 700 \$ 0.35 600 900 \$ 0.34 550 1.200 a. Is there a shortage or a surplus when the price is \$ 0.38? What about \$ 0.34? b. What are the equilibrium price and the equilibrium quantity? c. Graph the supply curve and demand curve. d. Show how the equilibrium price and quantity can be found on the graph. e. If there is a shortage or surplus at a price of \$ 0.38, calculate its size in billions of pounds and show it on the graph. 2. Assuming that either supply or demand, but not both, changes, indicate the direction and change in either supply or demand that must have occurred to produce the following a. A decrease in the price and quantity of apples. b. A decrease in the price of banana with an increase in the quantity of bananas. c.

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problemset_chpt3-2 - PROBLEM SET FOR CHAPTER 3 II(Demand...

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