Question

The UQ Union has permitted two florists (Lucy and John) to set up stalls on Market Day. If paid $24 for a bouquet, Lucy is willing to provide 27 bouquets and John is only willing to provide 18. At $14 a bouquet, Lucy is only willing to provide 13 bouquets and John will only provide 9. Which of the following statements are true:

a) The quantity supplied will fall to zero on non-market days at UQ.

b) Lucy's individual quantity supplied will rise when the price falls as more consumers will demand bouquets.

c) The market quantity supplied at UQ on Market Day is 40 when the price is $14 a bouquet.

d) Lucy's individual quantity supplied will increase when the price rises, due to more consumers demanding bouquets.

Answer 1

a. Given the supply behaviour of both the sellers in the market there will be no quantity supplied on nonmarket days.which means when there are no sellers in the market the market quantity is zero.

b.Lucy is willing to supply 27 bouquets at 24$ and 13 bouquets at 14$.Her supply schedule states that the supply behaviour is directly related to price .So she will supply more quantity only when the price offered is high.

c.The market quantity is the horizontal summasion of the individual quantities supplied .At $14 the quantity suppliied by Lucy is 13 bouquets and quantity supplied by John is 9 bouquets and therefore the market quantity is 22 bouquets only not 40.

d.The individual quantity supplied rises when the price rises as the supply behaviour is directly related to price, and an increase in the price in the market may be because an increase in the demand for bouquets,but Lucy's individual supply behaviour is due to increase in price only.