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Market Equilibrium and Policy

Market Equilibrium and Policy

Q MARKET EQUILIBRIUM & POLICY IN-CLASS WORKSHEET 1 This question examines the market for coffee. You will use the formulas for a demand and supply curve to identify the quantity of coffee demanded and the quantity of coffee supplied at different prices. Below, you have the formulas for the demand curve and the supply curve for pounds of coffee. If you plug any price into the formula for the demand function, you get the quantity demanded at that price. If you plug any price into the supply function, you get the quantity supplied at that price. The Demand Function for coffee: Q = 12 ? P The Supply Function for coffee: Q = 2P Task 1: Use the table below to find the quantity demanded and the quantity supplied of pounds of coffee at each price. Price (per pound of coffee) Quantity of Coffee Demanded (pounds) Quantity of Coffee Supplied (pounds) $ 2 4 4 8 6 12 8 10 2 Task 2: Identify the equilibrium price of a pound of coffee. Task 3: At a price of $2, is there a shortage or surplus of coffee? How many pounds? Task 4: At a price of $10, is there a shortage or surplus of coffee? How many pounds? MARKET EQUILIBRIUM & POLICY IN-CLASS WORKSHEET 3 This question examines the market for smartphones. You will use the quantity demanded and the quantity supplied at different prices to identify the equilibrium price and to examine what happens when the market price does not equal the market price. Below, you are provided with the quantity of smartphones demanded and supplied. This data is obtained from points on the demand and supply curves in the market for smartphones. Price (per smartphone) Quantity of Smartphones Demanded Quantity of Smartphones Supplied $150 1,100 200 200 1,000 400 250 900 600 300 800 800 350 700 1,000 Task 1: When the price of a smartphone is $200, what is the quantity of smartphones demanded, and what is the quantity supplied? Should you expect the price of smartphones to rise or fall? Task 2: When the price of a smartphone is $350, what is the quantity of smartphones demanded, and what is the quantity supplied? Should you expect the price of smartphones to rise or fall? Task 3: What is the equilibrium price of a smartphone? At this price, what is the quantity of smartphones demanded, and what is the quantity supplied? Watch the YouTube video, link below. Using a demand/supply diagram, explain how increased avocado prices have resulted from: https://www.youtube.com/watch?v=05oMsK0-jjA&t=374s 1. Popularity of avocadoes as a super food. 2. Supply restrictions from depleted ground water in major avocado growing regions of the world.

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According to the video there is a lot of wastage of Avocado as a large amount of water is needed to produce avocados but at the same time there is large demand of it as it is being considered to be a super food. Thus the demand and the supply diagram will be depicted as the figure above. According to the diagram, as avocado is considered to be a super food then the demand for that of the avocados will be going to shift to the right from the demand curve D1 to D2. On the other hand, the supply curve will also be going to shift to the left as large amount of water is being required for that of the Avocados. Thus, it will lead to a large fall in demand of the avocados as there is a high rise in prices and thus it can be assumed at the same time, that the fall in supply will be much greater than that of the rise being associated with demand.