Posted by austin on .
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?