Worksheet 2: Supply, Demand, Equilibrium and Price Restrictions

The table below shows the conditions of demand and supply for the milk market in a low-income country.

Price	Quantity demanded (gallons of milk)	Quantity supplied (gallons of milk)
$1.50	8,000	4,000
$2.00	7,500	4,500
$2.50	6,000	6,000
$3.00	4,000	6,500
$4.00	3,000	7,500

1. Use the data to graph the supply and demand curves. The graph can be a sketch or output from a graphing program, but make sure tolabel your curves and axes.
2. What is the equilibrium price and quantity in this market?
3. If a price ceiling is set at $2.00, how large will the excess demand or shortage be? That is, what is the difference between the quantity demanded and the quantity supplied?
4. If a price ceiling is set at $4, will the market be affected? Explain why or why not.