Answer to Question #87435 in Microeconomics for begonia shanty

Question

1. The demand and Supply Schedules for potato chips are:
Price(THIS IS INDIVIDUAL WORK.).
rand per bag) Quantity demanded(millions of bags a week) Quantity Supplied(millions of bags a week)
5 165 130
6 160 140
7 150 150
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? (5 marks)

Answer 1

a. In equilibrium Qd = Qs, so:

Qe = 145 units, P = R6.5.

b. If the price is R6 a bag, Qd = 150, Qs = 140, so there is a shortage of 150 - 140 = 10 units, and the price will increase.