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):
||Quantity Demanded, lb
||Quantity Supplied, lb
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.