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Computing the equilibrium price, quantity and shortage/ surplus under perfect competition.

 

The following are the numbers for a market for sugar (it's a competitive market):

Price$
Quantity Demanded, lb
Quantity Supplied, lb
9.00
400
620
8.50
420
600
8.00
440
580
7.50
480
560
7.00
500
540
6.50
520
520
6.00
540
500
5.50
560
480

a) Find the equilibrium price.

b) Find the equilibrium quantity;

c) If the government established a minimum price for sugar at $8.00, would it create a surplus or a shortage?

d) What is the surplus/shortage (in lb) at price $8.00?

e) What is the cost (in $) of producing the 560th pound of sugar?

Now suppose there's an increase in price of honey (sugar's substitute)

f) Will there be an increase in the demand for sugar or a decrease in the demand for sugar?

g) Suppose this increase/decrease in the demand for sugar changes quantity demanded by 40 lb at every price. Find a new equilibrium price and equilibrium quantity.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M922794

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