Question 1

The demand and supply curves for cupcakes can be described by the following equations:

Demand: QD = 100 - 20P and Supply: QS = 10 + 40P

Using the equations, complete the table below.

Price ($) Quantity Demanded Quantity Supplied

$0.50

$1.00

$1.50

$2.00

$2.50

(5 marks)

Question 2

On graph paper, plot the demand and supply curves. Identify the equilibrium price and quantity. (8 marks)

Question 3

Differentiate between a change in demand and change in quantity demanded. (4 marks)

Question 4

A. Calculate the excess supply or demand when P=$2.00 and show this point on the graph.

(2 marks)

B. Calculate the shortage or surplus when P=$0.50 and show this point on the graph. (2 marks)

Question 5

A. Sketch a diagram to show what would happen if the price of flour, a main ingredient used to

make cupcakes, has increased. (2 marks)

B. State what would happen to the equilibrium price and quantity for cupcakes.

(2 marks)

Question 6

Identify THREE (3) factors that would lead to an increase in the demand for cupcakes and

TWO (2) factors that would lead to an increase in the supply of cupcakes. (5 marks)

(TOTAL 30 MARKS)