Answer to Question #87491 in Microeconomics for mashele vukosi

Question

2. The demand and Supply Schedules for potato chips are:
Price(rand per bag) Quantity demanded(millions of bags a week) Quantity Supplied(millions of bags a week)
5 160 130
6 150 140
7 140 150
8 130 160
9 120 170
10 110 180


a. Draw a graph of the potato chip market and mark in the equilibrium price and quantity. (10 marks)
b. if the price is R6 a bag, is there a shortage or a surplus and how does the price adjust? (5 marks)

Answer 1

a. In equilibrium Qs = Qd = 145 units - equilibrium quantity, P = 6.5 - equilibrium price.

b. If the price is R6 a bag, then there is a shortage, because Qd>Qs (150>140), so the price will rise.