CASE STUDY 1 – 10%

DETERMINING EQUILIBRIUM PRICE AND SUPPLY USING THE DEMAND AND SUPPLY MODEL

Question 1: Demand and supply in the market for cheddar cheese is illustrated in Table below. Graph
the data and find the equilibrium. (2 points)

PRICE ($) Quantity Demanded Quantity Supplied

3.00 750 540
3.20 700 600
3.40 650 650
3.60 620 700
3.80 600 720
4.00 590 730

Question 2: Supposed we have a market supply and demand schedules for bicycles:

Price ($) Quantity Demanded Quantity Supplied

100 70 30
200 60 40
300 50 50
400 40 60
500 30 70
600 20 80

PLOT THE SUPPLY CURVE AND DEMAND CURVE AND DETERMINE THE EQUILIBRIUM PRICE AND
EQUILIBRIUM QUANTITY OF BICYCLES. (2 points)

ANSWER THE FOLLOWING QUESTIONS:

o IF THE PRICE OF BICYCLE IS $100, IS THERE A SURPLUS OR A SHORTAGE? HOW MANY UNITS?
WHAT WILL HAPPEN TO THE PRICE? 1 POINT
o IF THE PRICE OF BICYCLE IS $400, IS THERE A SURPLUS OR A SHORTAGE? HOW MANY UNITS?
WHAT WILL HAPPEN TO THE PRICE? 1 POINT

Question 3: Consider the market for laptops in 2015. Between 2015 and 2016, the equilibrium price of
laptops remained constant , but the equilibrium quantity of laptops increased. From this, you can
conclude that between 2015 and 2016, the supply of laptops _______(1 POINT)_________ and the
demand for laptops ______(1 POINT)_________.

Because the price of laptops remained constant, both the demand curve and the supply curve must
have shifted to the right. Draw the demand and supply model showing the shift to the right for both
demand and supply curve showing the equilibrium price and the movement of quantity supply.
2points