Question

Question 1

Consider the information about the demand and supply of t-shirts given in Table 1.

Table 1:

                                                                       

Price (dollars per unit)	Quantity Demanded (units per day)	Quantity Supplied (units per day)
15	51	36
16	49	39
17	47	42
18	45	45
19	43	48
20	41	51
21	39	54
22	37	57

a) Plot on a single diagram the demand curve and supply curve of the t-shirts. Label the

    axes, equilibrium price and quantity.

                                                                                                                                [4 marks]

b) If price were set at $16, is there an excess demand or supply? Calculate the excess.

                                                                                                                                [2 marks]

c) If price were set at $21, is there an excess demand or supply? Calculate the excess.

                                                                                                         [2 marks]

Suppose that the quantity demanded for t-shirts rises by 15 at each price level.

d) Calculate   the   new   quantity   of   t-shirts   demanded   at every price based on the

     information given.    

                                                                                                                                [4 marks]

e) Provide any two (2) factors that bring about the above increase in demand.       

                                                                                                                                [4 marks]

f) What is the new equilibrium price and quantity?

                                                                                                         [2 marks]

g) Use the same diagram in (a) and show the changes that takes place in (d). Label the

    new equilibrium price and quantity.  

                                                                                                                                [2 marks]

Answer 1

E.

If there is increase in demand it means there will be rightward shift in the demand curve

The two main factors that can cause it are-

• Rise in the income of the consumers
• Increase in taste and preferences of the consumer t-shirt