Suppose we have the following 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 the demand curve for bicycles. (Note please don’t worry about turning the curve in electornically, just plot it on paper. Doing so will help with the remaining questions.)

What is the equilibrium price of bicycles?
What is the equilibrium quantity of bicycles?
If the price of bicycles were $100, is there a surplus or a shortage? How many units of surplus or shortage are there? Will this cause the price to rise or fall?
If the price of bicycles were $400, is there a surplus or a shortage? How many units of surplus or shortage are there? Will this cause the price to rise or fall?

The equilibrium is where the two curves cross. That is at $300 , 50 , 50

If the price were $100 the demand would be 70 but we can only supply 30 for that price. Their is a shortage.

Now you do the $400
What do you think happens when the price is too high?

surplus

To plot the supply and demand curves for bicycles, we need to use the given quantity and price data.

We can plot the supply curve by using the quantity supplied values on the x-axis and the corresponding prices on the y-axis. Similarly, we can plot the demand curve using the quantity demanded values on the x-axis and the corresponding prices on the y-axis.

Here is a graph illustrating the supply and demand curves for bicycles:

```plaintext
Supply Curve -\
\
\
\ Demand Curve
\
\
\
\
Price ------------->
```

The equilibrium price of bicycles is the price at which the quantity demanded equals the quantity supplied. From the data, we can see that at a price of $300, the quantity demanded and the quantity supplied both equal 50. Therefore, the equilibrium price of bicycles is $300.

The equilibrium quantity of bicycles is the quantity at which the quantity demanded equals the quantity supplied. From the data, we can see that at a price of $300, the quantity demanded and the quantity supplied both equal 50. Therefore, the equilibrium quantity of bicycles is 50 units.

If the price of bicycles were $100, there would be a shortage. The quantity demanded at a price of $100 is 70 units, while the quantity supplied is only 30 units. The shortage would be equal to 70 - 30 = 40 units. This shortage would cause the price to rise because there would be more buyers willing to pay higher prices to acquire the limited supply of bicycles.

If the price of bicycles were $400, there would be a surplus. The quantity demanded at a price of $400 is 40 units, while the quantity supplied is 60 units. The surplus would be equal to 60 - 40 = 20 units. This surplus would cause the price to fall because sellers would want to reduce their inventory and may lower their prices to attract buyers.

To plot the supply and demand curves for bicycles, you can use the given quantities and prices. On a piece of paper, you will have the price on the y-axis and the quantity on the x-axis. Plot the points based on the given values:

Demand Curve:
($100, 70), ($200, 60), ($300, 50), ($400, 40), ($500, 30), ($600, 20)

Supply Curve:
($100, 30), ($200, 40), ($300, 50), ($400, 60), ($500, 70), ($600, 80)

Connect the points using a smooth line to indicate the demand and supply curves on the graph.

Now let's move on to the questions:

1. The equilibrium price is the price at which the quantity demanded equals the quantity supplied. It is the point at which the demand and supply curves intersect on the graph. Find the point where the demand and supply curves cross each other, and that will give you the equilibrium price.

2. The equilibrium quantity is the quantity at which the quantity demanded equals the quantity supplied. It is the quantity corresponding to the equilibrium price. Read off the value on the x-axis where the demand and supply curves intersect, and that will give you the equilibrium quantity.

3. If the price of bicycles were $100, compare this price to the equilibrium price. If the price is lower than the equilibrium price, there will be a shortage because the quantity demanded (70) is greater than the quantity supplied (30). The shortage can be calculated by subtracting the quantity supplied from the quantity demanded: 70 - 30 = 40. This shortage will cause the price to rise as sellers will want to take advantage of the high demand.

4. If the price of bicycles were $400, compare this price to the equilibrium price. If the price is higher than the equilibrium price, there will be a surplus because the quantity supplied (60) is greater than the quantity demanded (40). The surplus can be calculated by subtracting the quantity demanded from the quantity supplied: 60 - 40 = 20. This surplus will cause the price to fall as sellers will need to lower prices to sell excess inventory.

Remember, the equilibrium price and quantity are determined by the intersection of the supply and demand curves.