PROBLEM #5 The tables below provide information on the relationship between the

Question

PROBLEM #5 The tables below provide information on the relationship between the price of a product and either the quantity demanded by consumers, or the quantity supplied by producers. The first table represents the demand schedule, and the second represents the supply schedule. Demand Price Quantity Demanded Supply Price Quantity Supplied 12 18 24 30 120 96 72 48 24 14 19 24 29 28 38 48 58 a. Using price as the vertical (y-axis) variable, and quantity demanded as the horizontal (x- axis variable), find the slope of the demand curve. (You may find it helpful to use graph paper to plot the points on the demand curve.) b. Once again, using price as the vertical (y-axis) variable, and now quantity supplied as the horizontal (x-axis variable), find the slope of the supply curve. (You may find it helpful to use graph paper to plot the points on the supply curve.) c. Find the equilibrium price and quantity in this market PROLBEM #6 For parts a through c of this problem, state whether demand or supply will change (only one will change in each case). State whether the equilibrium price and quantity will rise or fall in the indicated market as a result of each change described. Illustrate each answer with a graph using supply-and-demand graphical analysis. Briefly explain each answer. Follow the separate instructions for part d

Explanation / Answer

Irrespective of what is meaured on x-aix or y-axis, when Plotting the points on a graph, we would always get a upward sloping supply curve and a downward sloping demand curve(the diagram always used for demand and supply curves in basic economics).

A.To find slope of a demand curve at a particular point we have divide the absoute change in price by absolute change in quantity. For example. form the table, when price=12 and Qty dd= 96. Slope means change in quantity demanded due to a change in price.Price changed from 6 to 12 units and Qty dd changed from120 to 96 units. At this point the slope will be 12-6/120-96=6/24=0.25.

Hence the slope at that particular point is 0.25. We have to note that slope differs for different points on the curve and hence slope can be calculated seperately for each point on the demand curve.Slope for a demand curve is negative due to negative relationship between price and demand.

B. To find the slope of supply curve, the same procedure used above has to implementd for point in the supply curve. For example, at point where price=14 and Qty sly= 28, the slope will be absolute change in price divided by absoute change in qty supplied. Hence slope will be 14-9/28-18=5/10=0.50. ANd the slope is positive due to posittive relationship between price and Supply.

C. A simple observation of the tabe and/or the graph, we can evidently see that the equilibrium price is 24units and equibrium quantity is 48units( equlibrium is achieved at the point where quantity demanded is equal to quantity supplied at a given price)

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