Answer to Question #296824 in Microeconomics for mazin alzaki

Question

The market for ice-cream has the following demand and supply schedules: 

 

Price 

Quantity Demanded 

Quantity Supplied 

$ 3 

105 

70 

$ 4 

90 

90 

$ 5 

80 

106 

 $7 

65 

120 

$ 10 

53 

130 

$ 12 

39 

150 

 

a. Graph the demand and supply curves.  (4 Marks) 

b. What is the equilibrium price and quantity in this market? (2 Mark) 

c. If the actual price in this market were above the equilibrium price, what would drive the market toward the equilibrium?  (2 Marks) 

d. If the actual price in this market were below the equilibrium, what would drive the market toward the equilibrium? (2 Marks)  

Answer 1

b) The equilibrium price is 4

c) Quantity supply would increase while quantity demanded would reduce. This would make the suppliers to lower their prices so as to meet the price at which consumers are willing to buy and suppliers willing to sell.

d) Quantity demanded would increase while quantity supplied would reduce. Eventually prices would start increasing u to the point where consumers would be willing to buy and suppliers willing to sell.