Answer to Question #304644 in Microeconomics for tashfia

Question

3. The following is the hypothetical supply and demand schedule for sugar: 

 

 

Price (Tk.)

Quantity demanded 

(Kg)

Quantity Supplied 

(Kg)

4

1000

400

8

800

400

12

600

400

16

400

400

20

200

400

a) Plot the demand and supply curve for sugar​

b) Find the equilibrium price and quantity of sugar​

c) What will happen to equilibrium price and quantity if incomes of the consumers of sugar (normal good) are increased?

 

Answer 1

a)

The demand and supply curve of sugar are shown below;

b)

Equilibrium price and quantity are indicated at the point where the demand curve intersects with the supply curve.

Equilibrium price (P_e)= 16 (TK)

Equilibrium quantity (Q_e) = 400Kg

c)

An increase in consumer income will shift the demand curve to the right. This will cause an increase in the price hence equilibrium price will move upwards. On the other hand, the equilibrium quantity will remain the same since the suppliers in this market seem not to be affected by changes in price.