12. Market equilibrium and disequilibrium The following graph shows the monthly
ID: 1165222 • Letter: 1
Question
12. Market equilibrium and disequilibrium The following graph shows the monthly demand and supply curves in the market for calendars. 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 Calendars Price Dollars calendar 90 20 80 E 70 Quantit Demanded (Calendars) 310 % uantity Supplied 190 60 o 50 40 a 20 10 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Calendars) The equilibrium price in this market is per calendar, and the equilibrium quantity is calendars bought and sold per monthExplanation / Answer
From the graph, equilibrium exists where demand equals supply curve hence the equilibrium price in the market is $50 and the equilibrium quantity is 250 calendars brought and sold.
At price $40, quantity demanded is greater than supplied hence there exists a shortage. Hence when there is excess demand in the market, it puts pressure on the price of the product to rise to counter excess demand and restore equilibrium.
At price $60, there exists a surplus in the market.i.e.quantity supplied is greater than quantity demanded or increase in inventories where in order to get back to equilibrium requires the price to fall so that demand increases. Hence the downward pressure on price.
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