Answer to Question #147435 in Microeconomics for aqsa nabi

Question

Price (Rupees per Ice-cream cup) Quantity demanded (Ice-cream cup per month) Quantity Supplied (Ice-cream cup per month)
140 500 1500
120 750 1200
100 1000 1000
80 1250 750
60 1500 600
40 1750 300

a) Plot the demand and supply curves and show the equilibrium price and quantity. Also, briefly explain if law of demand and supply holds true in this case. (2 Marks)
b) Is there surplus or shortage in the market at price Rs.40? At price Rs.120? (2 Marks)
c) Suppose if the price of frozen yogurt decreases, elucidate the change it might cause on the ice-cream market given the consumption behavior and also illustrates the same through using 2-dimensional space. In your opinion what type of elasticity best describes this situation? (3 marks)
d) Suppose the price of milk decreases from the equilibrium price. Explain what will happen to the supply curve and also indicate the same on the graph.

Answer 1

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