Question

Macroeconomics

d. Did the increase in production costs cause a "decrease in supply" or a "decrease in quantity supplied"? 3. Refer to the following expanded table from review question 8. LO3.4 a. What is the equilibrium price? At what price is there neither a shortage nor a surplus? Fill in the surplus-shortage column and use it to confirm your answers. b. Graph the demand for wheat and the supply of wheat. Be sure to label the axes of your graph correctly. Label equilibrium price P and equilibrium quantity Q How big is the surplus or shortage at $3.40? At $4.90? How big a surplus or shortage results if the price is 60 cents higher than the equilibrium price? 30 cents lower than the equilibrium price? c. Thousands of Bushels Supplied 72 73 75 Surplus (+) or Shortage (-) Thousands of Bushels Demanded 85 80 Price per Bushel $3.40 3.70 4.00 4.30 4.60 4.90 70 65 60 79 81 How will each of the following changes in demand and/or sup- ply affect equilibrium price and equilibrium quantity in a com- 4. t: that is, do price and quantity rise, fall, or because petitive marke main unchanged, or are the answers indeterminate itudes of the shifts? Use supply and

Answer 1

3.

A.

Equilibrium price is $4, because at this price, quantity demanded is equal to quantity supplied. At price of $4, there is neither surplus nor shortage.

B.

C.

At $3.4, shortage = 13

At $4.9, surplus = 21

At $4.6 surplus = 14

At $3.7 shortage = 7