Question

Q4. The market for pizza has the following demand and supply schedule

Price	Quantity Demanded	Quantity Supplied
$4	135	26
$5	104	53
$6	81	81
$7	68	98
$8	53	110
$9	39	121

1. Graph the demand and supply curves
2. What is the equilibrium price and quantity in this market?
3. If the actual price in this market is above the equilibrium price what would drive the market towards the equilibrium?
4. If the actual price in this market is below   the equilibrium price what would drive the market towards the equilibrium?

Answer 1

A)

B) the equilibrium price is $6 and quantity is 81

c) if the market price is above the equilibrium price, quantity supplied is greater than quantity demanded, creating a surplus. Market price will fall thus driving back the equilibrium

d) If the market price is below the equilibrium price, quantity supplied is less than quantity demanded, creating a shortage. The market is not clear. It is in shortage. Market price will rise because of this shortage thus driving back the equilibrium