Problem Set 2: Demand and Supply Black, Berows and Blue relish moonshine while G

Question

Problem Set 2: Demand and Supply Black, Berows and Blue relish moonshine while Green, Grey, and Gold love to distill it. The following table gives their respective weekly demand or supply Price/ bottle Black Brown Blue Demand Green Gray Market Supply Gold 1. Calculate total market demand and total market supply. Enter the values in the table. 2 Plot the market demand (Di) and market supply (S) curves overleaf (not on a separate piece of 3. State the equilibrium price 4 If the price is $1, there is a SURPLUS / SHORTAGE ofbottles/week. 5. If the price is $5, there is a SURPLUS/SHORTAGE ofbottles/ week. paper), Label your axes correctly and strive for accuracy in your scales. quantity traded 6. Now the price of corn (an essential ingredient in moonshine) becomes less What will happen to the equilibrium price and equilibrium quantity of Equilibrium price would INCREASE/ DECREASE/BE UNCHANGED/ BE INDETERMINATE Equilibrium quantity would INCREASE / DECREASE/BE UNCHANGED / BE INDETERMINATE 7. Show how your diagram should be altered to reflect the situation Question 6. Subscript any redrawn curve with a "2", Le, D2 or S2 8 Now consumer income falls and, at each price, Black is willing and able to buy 2 fewer bottles of moonshine per week, Brown 1 fewer bottle, and Blue 1 fewer bottle. Show the new demand graph. 2. Predict what would happen to the equilibrium price and equilibrium quantity, based on your answer to Question & Equilibrium price would INCREASE / DECREASE/BE UNCHANGED / BE INDETERMINATE Equilibrium quantity would INCREASE/DECREASE/ BE UNCHANGED/BE INDETERMINATE 10. Taking both changes together (Questions 6 and 8), predict what would happen to the equilibrium price and equilibrium quantity of moonshine. Equilibrium price would INCREASE / DECREASE/ BE UNCHANGED / BE INDETERMINATE Equilibrium quantity would INCREASE/ DECREASE/ BE UNCHANGED/BE INDETERMINATE

Explanation / Answer

Solution 1 Proce / Bottle Demanders Market Black Brown Blue Demand 5 3 2 1 6 4 6 4 3 13 3 7 5 4 16 2 10 12 7 29 1 12 14 9 35 Proce / Bottle Suppliers Market Green Grey Gold Supply 5 5 8 8 21 4 4 5 4 13 3 3 4 3 10 2 2 2 2 6 1 1 0 1 2 Solution :- 2 Not possible to make graph on chegg Solution :- 3 The Equilibrium price is the price at which the market demand and market supply are equal Therefore the Equilibrium price is $4 and the quantity traded is 13 Solution :- 4 If the price is 1$ then the market supply is more than the market demand Therefore there is a surplus of 15 bottles i.e (21 - 6) Solution :- 5 If the price is 5$ then the market demand is more than the market Supply Therefore there is a shortage of 33 bottles i.e (35 - 2) As per chegg policy there is a need to answer 1 question or 4 in case of subparts Now feel free to ask any query through comments

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