Question

1

You are given the following information on the supply and demand for calculators:

Price per Calculator	Quantity of Calculators demanded	Quantity of Calculators supplied
$ 5	25 calculators	7 calculators
6	22	9
7	19	16
8	18	18
9	13	21
10	11	26
11	10	31

a) Draw the demand and supply curves on the same graph.

b) What is the equilibrium price and quantity demanded and supplied of calculators?

c) Would the price of $10 create a surplus or shortage of calculators and by how many?

d) What happens to the demand for calculators if the income of the people increases?

e) Show the difference on the same graph.

Answer 1

(a)

(b) In equilibrium, quantity demanded equals quantity supplied.

Price = $8 and quantity = 18

(c) When price = $10,

Quantity demanded (Qd) = 11 and quantity supplied (Qs) = 26. Since Qs > Qd, there is a surplus equal to

Surplus = Qs - Qd = 26 - 11 = 15

(d) Increase in consumer income will increase demand, shifting demand curve rightward.

(e) In above graph, new demand is the "New Demand" curve.