Question

Change in Demand or Supply from Market Equilibrium and Policy

The following table displays the demand for kale in a small suburban town in East Kansas. Due to a recent article describing the health benefits to kale gaining popularity, the quantity of kale demanded increased by 10lbs at every price point.

Price (dollars per pound)	Old Quantity Demanded (lbs)	New Quantity Demanded (lbs)	Quantity Supplied (lbs)
$1.50	30		10
$1.75	25		15
$2.00	20		20
$2.25	15		25
$2.50	10		30

1. Complete the table with the new quantity demanded at each price point (10 points).

2. An increase to the number of consumers to the kale market will cause the demand curve to shift in which direction? (5 Points)

3. Draw the old demand curve and supply graph. (10 points)

4. Draw the new demand curve and supply graph. (10 points)

Refer to graphs to answer remaining questions:

5. Identify the initial equilibrium price and quantity. (5 points)

6. Identify the new equilibrium price and quantity. (5 Points)

7. Now suppose demand decreased by 10lbs at every price. Identify the new equilibrium price and quantity in the market? (5 points)

Answer 1

Answer

Price(dollars per pound)	Old Quantity Demanded(Ibs)	New Quantity Demanded(Ibs)	Quantity Supplied(Ibs)
$1.50	30	30+10 = 40	10
$1.75	25	25+10 = 35	15
$2.00	20	20+10 = 30	20
$2.25	15	15+10 = 25	25
$2.50	10	10+10 = 20	30

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An increase to the number of consumers to the kale market will cause the demand curve to shift rightward.

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The old demand curve and supply curve graph is shown below ;

The initial equilibrium price is $2.00 and the initial equilibrium quantity is 20 units.

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The new demand curve and supply curve graph is shown below;

The new equilibrium price is $2.25 and the initial equilibrium quantity is 25 units.

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If demand decreased by 10lbs at every price, the new demand schedule will be as follows

Price(dollars per pound)	Old Quantity Demanded(Ibs)	New Quantity Demanded(Ibs)	Quantity Supplied(Ibs)
$1.50	30	30 -10 = 20	10
$1.75	25	25 -10 = 15	15
$2.00	20	20 -10 = 10	20
$2.25	15	15 -10 = 5	25
$2.50	10	10 - 10 = 0	30

The new demand curve and supply curve graph will be as follows;

The new equilibrium price is $1.75 and the initial equilibrium quantity is 15 units.

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