1. Supply and Demand Schedules for Bathing Suits (38 points)

Supply Schedule Demand Schedule

Price Quantity Supplied Price Quantity Demanded

$30 18000 $30 40000

$40 24000 $40 35000

$50 30000 $50 30000

$60 36000 $60 25000

$70 42000 $70 20000

1. Graphically represent the supply and demand schedules in a supply curve and

demand curve, respectively, on the same graph. Do not put the two curves on

separate graphs.

1. What are the equilibrium price and quantity in this example?
2. At each price, other than the equilibrium price, determine whether there exists a shortage or surplus of the bathing suits in the market, and state the size of this shortage or surplus at each price.
3. Suppose the price of cotton (an input or resource used to produce the bathing suit)

increases. Show how this would impact your graph for the bathing suits. In other

words, show if the supply curve or the demand curve shifts (both will not shift)

and show the direction in which the curve will shift. Label what you did as C,

explain why you shifted the curve that you did and explain what has occurred on

the graph to the equilibrium price and quantity.

1. As it is now summer, and people are engaging in outdoor activities, this will affect

the willingness of consumers to purchase bathing suits. Show what impact this

increased willingness will have on your graph for the bathing suits. In other

words, show if the supply curve or the demand curve shifts (both will not shift)

and show the direction in which the curve will shift. Label what you did as W,

explain why you shifted the curve that you did and explain what has occurred to

the equilibrium price and quantity on the graph.

1. If the government intervened and stated that the price for the bathing suits was to

be set at $30, would they be setting a price ceiling OR a price floor? Explain.

1. What quantity of bathing suits would be sold at the price of $30?