Question

Suppose the graph

The graph above is represented in the table below. Please complete the table below identifying the shortage or surplus.

Price (10kg bag)	Demand (10 kg bags)	Supply (SS) (10 kg bags)	Surplus (+) Shortage (-)
10	89	29
20	70	40
30	55	55
40	39	67
50	25	80
60	11	95

1. Based on your findings in the table above, what is the market equilibrium price and quantity for rice?                                                                        
2. Also, please examine the factors that can motivate the government to reduce the price of rice at $20 per 10 kg bag and the effects of that government legislation on the rice market.                                                   (7marks)

Answer 1

Answer -

A) Market equilibrium price is 30 at which demanded and supplied quantity of rice is equal i.e.55 (10,kg bags of rice) demanded and supplied .

B)

Normally price of the commodity is determined by demand and supply factors.But if the Government reduce the price of rice at $20 per 10kg which is below the equilibrium price of $30., number of factors are responsible for it.

1.price stability 2.Make available more quantity of goods to Consumers at low price.3.Avoiding artificial shortage by trader for profit maximization etc.4.Avoid the exploitation of consumers for buying the goods at higher prices.

Effects..

1.Because of low price of rice affordability of Consumers to purchase quantity of rice will increase.

2.If the price of rice below the market equilibrium price then the supplier don't want to supply much quantity at low prices,so there is Possibility of less supply of rice as compared to demand.

3.As a result of excess demand there is a possibility of black marketing as less supplied quantity can't satisfy the excess demand .