Question

5.2.1. Redraw the graph and illustrate what the effect on the market will be if a price

is charged above the equilibrium price. (4)

5.2.2. At any price below the equilibrium price, the quantity demanded will be greater

than the quantity supplied. This means that there is an excess demand for milk.

Explain how market forces will eliminate an excess demand for milk. (2)

5.3. Calculate the equilibrium quantity and price if the quantity supplied can be represented

by the equation Qs = 500 + 2P and the quantity demanded can be represented by the

equation Qd = 2 000 – 1.5P. [Tip: Solve the value of P first and then substitute this

P-value in the calculation of the Q-value.] (4)

5.4. It is important to differentiate between a change in supply and a change in the quantity

supplied.

5.4.1. List one determinant that will cause a change in supply. (1)

5.4.2. List one determinant that will cause a change in the quantity supplied. (1)

5.5. According to a breaking news article entitled “Coffee makes you clever”, research

shows that coffee consumption improves mental capacity and functioning. Draw a

graph to illustrate how the news article will affect the equilibrium price and quantity in

the market for tea, a substitute product for coffee

Answer 1