Problem Set 2 Demand and Supply Name Black, Brown, and Blue relish moonshine whi

Question

Problem Set 2 Demand and Supply Name Black, Brown, and Blue relish moonshine while Green, Grey, and Gold love to distill ia. The following table gives their respective weekly demand or supply schedules. Price/ Demanders bottle Black Brown Blue Demand Green Gold Supply $5 54 53 $2 $1 10 12 12 14 1. Calculate total market demand and total market supply. Enter the values in the table. 2. Plot the market demand (Dy) and market supply (Sy) curves overleaf (nt on a eparate piece of 3. State the equilibrium price 4 If the price is S1, there is a SURPLUS/SHORTAGE of 2 papert). Label your axes correctly and strive for accuracy in your scales. nU bottles/week bottles/week. , and quantity traded If the price is $5, there is SURPLUS/ SHORTAGE of 6. Now the price of corn (an essential ingredient in moonshine) becomes less expensive. What will happen to the equilibrium price and equilibrium quantity of moonshine? Equilibrium price woule INCREASE DECREASEBUNCHANGED / 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", ie, D2 or S2 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 curve (D) on your graph. 9 Predict what would happen to the equilibrium price and equilibrium quantity, based on your answer to Question 8. Equilibrium price would INCREASE/ DECREASE/BE UNCHANGED/BE INDETERMINATE Equilibrium quantity would INCREASE/ DECREASE / BE UNCHANGED/BE INDETERMINATE 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 INDETERMINAT Equilibrium quantity would INCREASE/DECREASE/BE UNCHANGED / BE INDETERMINATE

Explanation / Answer

9) Decrease in consumer income leads to decrease in demand for the good. Decrease in demand with no change in supply creates deficit demand. To combat deficit demand, price falls.

Equilibrium price would DECREASE

Equilibrium quantity would DECREASE

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