Consider the following Demand and Supply Schedules for good A....

Price of good A..............................................Qdof good A....................................Qsof good A

$2.50......................................................................0 200

$2.00......................................................................50 150

1.50......................................................................100 100

1.00......................................................................150 50

0.50.....................................................................200 0

Questions:

(a) Draw a diagram of the demand and supply curves for good A. (2 marks)

(b) What is the equilibrium price and quantity of good A? (1 marks)

(c) Suppose that the price of good A is currently set at $1.00 each. Is there a shortage or surplus of good A at this price? How will the price, quantity demanded and quantity supplied adjust? Explain... (3 marks)

(d) Illustrate how each of the following changes will affect either the demand or supply side for good A. Show the change in equilibrium price and quantity...

(i) There's an increase in the price of good B, a substitute for good A (all else equal) (2 marks)

(ii) Due to a higher minimum wage, producers of good A are forced to pay higher wages to employees (all else equal)

(iii) Due to health concerns, consumers eat less of good A (all else equal)

(iv) There's an increase in the price of good A (all else equal)

(v) Several new firms begin selling good A (all else equal)