1)Consider the following demand/supply schedules for peaches in Ontario, Canada:

Price (P).......................Quantity demanded.................Quantity supplied......Shortage/Surplus

($/pound)(Pounds/week)(Pounds/week)

$1.00...............................5000............................................1400

1.50...............................4500...........................................2000

2.00...............................4000...........................................2700

2.50...............................3500...........................................3500

3.00...............................3000...........................................4400

3.50...............................2500...........................................5400

4.00...............................2000...........................................6500

Questions:

(a)Draw a diagram of the market for peaches and determine the equilibrium price (Pe) and equilibrium quantity (Qe).

(b)Suppose that the grocery stores initially decide to charge $3.50/pound for peaches. Is there a shortage or surplus of peaches at this price? Explain. How will the price and quantity of peaches adjust as a result?

(c)Explain how each of the following changes will affect the market for peaches. Draw a separate diagram for each change and explain the effect on equilibrium price and quantity...

(i)There is a decrease in the price of peaches (all else equal)

(ii)There is a decrease in the price of plums, a substitute in consumption for peaches (all else equal)

(iii)A new machine has been invented that allows farmers to harvest peaches more quickly (all else equal)

(iv)There is an increase in the price of fertilizer, used to grow peaches (all else equal)

(v)A hurricane destroys peach crops in Florida (all else equal)