QUESTION 2

The data in the table above represent the market demand and supply for strawberries over a range of prices.

Price (cents) 10 20 30 40 50

Quantity Demanded 90 80 70 60 50

Quantity Supplied 30 50 70 90 110

1. Plot on a single diagram the demand and supply curve. (4 marks)

2. What would be the excess demand or supply if price were set at 10 cent? (4 marks)

3. What would be the excess demand or supply if price were set at 40 cent? (4 marks)

4. Define the equilibrium of a market. Find the equilibrium price and quantity. (4 marks)

5. Suppose that an increase in consumers' income results in an increase of strawberries' demand. The demand of strawberries rises by 30 million tins/year at each price level. Find the new equilibrium price and quantity. (4 marks)