Question

 The equilibrium price in this market is _______  per shirt, and the equilibrium quantity is _______  shirts bought and sold per month.

 Complete the following table by indicating at each price whether there is a shortage or surplus in the market, the amount of that shortage or surplus, and whether this places upward or downward pressure on prices.

Answer 1

Ans) Equilibrium is a point where quantity demanded is equal to quantity supplied. On graph it is a point where demand and supply curve intersect. The price at this point is known as equilibrium price and the quantity is known as equilibrium quantity.

Price always tries to reach equilibrium. So when price is below the equilibrium price, there will be an upward pressure on the price. Further, at a price llwer than equilibrium price, there will be shortage i.e quantity demanded exceeds quantity supplied.

When price is above equilibrium price, there is downward pressure on the price. At a price higher than equilibrium price, there will be surplus i.e quantity supplied exceeds quantity demanded.

1) Equilibrium price = $40, equilibrium quantity = 250 units.

2) At price of $48÷

Qd= 125 , Qs = 375 , downward pressure , surplus

3) At price of $32÷

Qd= 375, Qs= 125, upward pressure on price, shortage.

(Kindly note that value of Qd and Qs may vary slightly. To know the exact value, kindly put the value of price in graph input tool.)