Answer to Question #47884 in Microeconomics for Asad Badvi

Question

Q7. “In the corn market, demand often exceeds supply and supply sometimes exceeds demand.” “The price of corn rises and falls in response to changes in supply and demand.” In
Which of these two statements are the terms “supply” and “demand” used correctly? Explain.
Q8. KEY QUESTION Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as shown in the accompanying table.
a. What is the equilibrium price? What is the equilibrium quantity? Fill in the surplus-shortage column and use it to explain why your answers are correct.
b. Graph the demand for wheat and the supply of wheat. Be sure to label the axes of your graph correctly. Label equilibrium price P and equilibrium quantity Q.
c. Why will $3.40 not be the equilibrium price in this market? Why not $4.90? “Surpluses drive prices up; shortages drive them down.” Do you agree?

Answer 1

Q7. “In the corn market, demand often exceeds supply and supply sometimes exceeds demand.” “The price of corn rises and falls in response to changes in supply and demand.”
The terms “supply” and “demand” are used correctly in the second statement, because only quantity supplied may be higher or lower than quantity demanded, but we can't compare demand and supply.
Q8. The accompanying table is needed to answer this question.