The table shows the demand and supply schedules for hot chocolate Excellent weat

Question

The table shows the demand and supply schedules for hot chocolate Excellent weather in cocoa growing areas increases the quantity supplied by s0 cups a day at each price Quantity Quantity demanded supplied (cups per day At the initiai equilibrium price, there is 145 170 1.95 aot hot chocolate. The price of a new uium ededas he marketmovs ts O A. surplus, rises: increases OB. suplus, tails, increases O C. surplus, rises, decreases O D. shorage; rnes, decreases 570 2.45 ? E. shortage. alsreeases a cup and the new equilbrium quanitity is The new equilbrium price is cups a day Cick to select your answers 5

Explanation / Answer

Answer is B; Surplus; Falls and increases. Explanation: t the equilibiruim point, the demand was 540 and supplied is also 540. Howevver, with increases production, the supply increases cause an surplus. As a result of that the demand rises and price will fall. The new equilrium price is $ 1.45 and new equilrium quantity is 600 units The table is given below: Price Demand Rev. Supply 1.45 600 600 1.7 540 630 1.95 480 660 2.2 420 690 2.45 360 720 As demand and supply equals at 600 units, therefore equilibrium price is 1.45 and quantity is 600 units

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