Question

I do not understand how to calculate the quantity demanded and quantity supplied? 1. Individual Problems 8-1 The widget market is competitive and includes no transaction costs. Five suppliers are willing to sell one widget at the following prices: $30, $20, $10, $5, and $3 (one seller at each price). Five buyers are willing to buy one widget at the following prices: $10, $20, $30, $38, and $44 (one buyer at each price). For each price shown in the following table, use the given information to enter the quantity demanded and quantity supplied. Price Quantity Demanded Quantity Supplied ($ per widget) (widgets) (widgets) $3 $5 $10 $20 $30 $38 $44 In this market, the equilibrium price will be per widget, and the equilibrium quantity will be widgets.

Answer 1

Start from a lowest price at $3. At this price, the minimum willingness to pay by any buyer is $10. Hence when price is less than $10, all five buyers will buy 1 unit so quantity demanded at P = 3, is QD = 5 units. When P = 5, QD = 5 units. When price is 10, it is still 5 units demanded so P = 10, QD = 5 units. Now when price is 20, one buyer who had a maximum willingness to buy at 10 will leave the market so QD is now 4 units. At P = 30, one more buyer leaves so QD = 3 units. At P = 38, QD = 2 units and at P = 44, QD = 1 units

Now when price is $3, only 1 seller is willing to sell so QS = 1 unit. When P = $5 two sellers are selling so QS = 2 units. When P = 10, QS = 3 units and so on. The table is shown below

Price	Quantity demanded	Quantity supplied
3	5	1
5	5	2
10	5	3
20	4	4
30	3	5
38	2	5
44	1	5

In this market, the equilibrium price will be $20 per widget, and the equilibrium quantity will be 4 widgets. This is because at this price QD = QS = 4 units.