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?

Answer 1

If the price is R6 a bag, it is a shortage. Prices will rise, until it find its equilibrium level.