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1. The table below shows the quantity demanded and supplied on barley for each price per...

1. The table below shows the quantity demanded and supplied on barley for each price per bushel. Price per Bushel Quantity Demanded per Month (million bushels) Quantity Supplied per Month (million bushels) Sate of the Market (shortage or surplus) $2.30 400 300 $2.40 370 320 $2.50 340 340 $2.60 310 360 $2.70 280 380 a. Based on the information above, plot a chart with supply and demand curves. b. What are the equilibrium price and quantity of barley? c. If the market price of barley is $2.70 per bushel, is there a shortage or surplus of barley? What is the shortage or surplus? As a result, would the market price rise or fall? d. If the market price of barley is $2.40 per bushel, is there a shortage or surplus of barley? What is the shortage or surplus? As a result, would the market price rise or fall?

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Answer #1

Ans. 1. b) Equilibrium price $2.50 per bushel and equilibrium quantity 340 million bushels

c) At Price $2.70, there is surplus (i.e. Qs> Qd)

surplus = 380 -280 =100 million bushels and the price will fall due to unsolved inventory of barley.

d) At price $2.40, there is a shortage (i.e. Qd> Qs)

shortage = 370 -320= 50 million bushels and the price will rise due to excess demand for barley.

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