The following graph shows the monthly demand and supply curves in the market for
ID: 1141689 • Letter: T
Question
The following graph shows the monthly demand and supply curves in the market for teapots. Use the graph input tool to help you answer the following questions. Enter an amount into the Price field to see the quantity demanded and quantity supplied at that price. You will not be graded on any changes you make to this graph. Graph Input Tool Market for Teapots 80 72 64 S6 48 Price 16 Dollars per teapot) 310 Quantity Supplied Teapots) 32 16 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Teapots) The equilibrium price in this market is S per teapot, and the equilibrium quantity is teapots bought and sold per month.Explanation / Answer
The equilibrium price in the market is $40 and the equilibrium quantity bought and sold is 250 units, i.e, equilibrium is at the point where demand and supply meet each other.
Explanation :- a.) First case of $48 . Here the Quantity supplied at $48 is greater than quantity demanded at this price. Hence there exists a situation of excess suppy or surplus at this level of price. Therefore, to sell more suppliers will have to lower their price. As the price decreases, quantity demanded increases (LAW OF DEMAND) and quantiy supplied falls (LAW OF SUPPLY) due to movement in demand and supply curves respectively. This price keeps on falling till equilibrium is attained at $40.
b.) Second case of $32. Here the Quantity demanded at $48 is greater than quantity supplied at this price. Hence there exists a situation of excess demand or shortage at this level of price. Therefore, to buy the product the buyers are willing to pay a higher price. As the price increases, quantity demanded decreases (LAW OF DEMAND) and quantiy supplied rises (LAW OF SUPPLY) due to movement in demand and supply curves respectively. This price keeps on rising till equilibrium is attained at $40.
price shortage/ surplus Amount Pressure $48 Surplus Qunatity supplied at $48 - demanded at $48 Downward pressure on price $32 Shortage Quantity demanded at $32 - supplied at $32 Upward pressure on priceRelated Questions
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