Question

The graph shows the market for tutoring at a university. A graph plots demand and supply curves with Quantity (hours of tutoring per week) along the horizontal axis and Price (per hour of tutoring) along the vertical axis. The supply curve starts at 2.50 dollars on price and has a positive slope. The demand curve starts at 25 dollars on price and has a steep negative slope. The curves intersect at 300 hours on quantity, 10 dollars on price. The other points marked on the supply curve are: 7.50 dollars for 200 hours of tutoring per week; 20 dollars for 700 hours of tutoring per week and 25 dollars for 900 hours of tutoring per week. If a price ceiling is imposed at $5 per hour, there will be a shortage of _____ hours of tutoring.

Answer 1

By plotting the given points on a graph paper or using an excel sheet and joining the corresponding points to obtain the demand curve and the supply curve, we obtain the following plot.

Equation of the demand curve is Qd = 500-20P

When the price ceiling of $5 is applied, the quantity demanded, Qd = 400 hours

The quantity supplied, Qs = 100 hours

Therefore, Shortage = Qd - Qs = 400 - 100 = 300 hours

Ans: 300 hours