Name: Renee Wong

Student ID: 101223251

Tutorial Group: Group 5 (Thursday @ 9:00 a.m.)

Review Questions
Question 1
a) The equilibrium price of corn is $15 per bushel and the equilibrium quantity is 15,000
bushels.
b) If the prevailing price is $9 per bushel, there is a shortage in the market.
c) The quantity of the shortage is 18,000 bushels.
d) If the market price is $9 per bushel, only 6,000 bushels will be sold. This is because there
will only be 6,000 bushels supplied in the market.
e) If the market price is $9 per bushel, the market price has to increase to $15 per bushel to
restore equilibrium in the market. This is because when the price increase, the quantity
demanded will decrease from 24,000 to 15,000 bushels and the quantity supplied will also
increase from 6,000 to 15,000 bushels.
f) The suppliers will not be able to sell 24,000 bushels of corn at any price.
g) If the market price is $21 per bushel, there is a surplus in the market.
h) The quantity of the surplus is 21,000 bushels.
i) If the market price is $21 per bushel, only 7,000 bushels will be sold. This is because
there will only be 7,000 bushels demanded in the market.
j) If the market price is $21 per bushel, the market price has to decrease to $15 per bushel to
restore equilibrium in the market. This is because when the price decrease, the quantity
demanded will increase from 7,000 to 15,000 bushels and the quantity supplied will also
decrease from 28,000 to 15,000 bushels.

Question 3
The price elasticity of demand for Coca-Cola is not the same as the price elasticity for soft
drinks. This is because the market of Coca-Cola is more narrowly defined, which means there
will be more substitutes are available, and hence the more elastic is the demand. Moreover,
the market of soft drinks is more broadly defined, hence there will be fewer substitutes are
available, which will result in low price elasticity of demand.