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Quantity supplied and demanded Essay Sample

Quantity supplied and demanded Pages
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1) The table below indicates the total quantity supplied and demanded of flashlights at different price levels. Price
Quantity Demanded
Per Month
Quantity Supplied
Per Month
$5
6,000
10,000
$4
8,000
8,000
$3
10,000
6,000
$2
12,000
4,000
$1
14,000
2,000

a. Draw Supply and Demand Curves.

b. What are the equilibrium price and the equilibrium quantity?
The equilibrium price is $4 and the equilibrium quantity is 8,000 flashlights. c. Suppose the market price is $5. What problem would exist in the market? Does it lead to surplus or shortage? How do you expect this problem will affect the price? Indicate this on the supply and demand graphs.

If the market price is $5 means that the consumers are demanding a smaller quantity. The consumers are demanding 6000 flashlights where at $5 the quantity supplied is 10,000. There will be a surplus if the market price is at $5. d. Assume the market price is currently $2. What problem would occur in the market due to this price? Will it be shortage or surplus? What will its effect on the price? Indicate this on the supply and demand graph.

With the market price at $2 the quantity demanded is going to be 12,000 however the quantity supplied is going to be 4,000 causing a shortage. 2) Consider supply and demand schedules for Alaska Salmon indicated in the following tables to answers questions from a –d below. Price of Salmon per Pound

Quantity of Salmon Supplied (pounds)
$30
900
$25
700
$20
600
$15
300
$10
100

First, assume that Alaskan Salmon can be sold only in the United States. The U.S. demand schedule is as follows: Price of Salmon per Pound
USA Quantity of Salmon Demanded (pounds)
$30
100
$25
300
$20
600
$15
700
$10
900

a Referring to the schedules of supply and demand, what is the equilibrium price of Salmon? What is the equilibrium quantity of salmon demanded and supplied at the equilibrium price?

The equilibrium price would be $20 and the equilibrium demand and supplied is 600 pounds of salmon.

b Second, assume that Alaskan Salmon can also be sold in UK. The UK demand schedule for salmon is as follows:

Price of Salmon per Pound
Quantity of Salmon Demanded (pounds)
$30
200
$25
400
$20
500
$15
700
$10
900

What is the combined demand schedule for Alaskan salmon after the UK consumers join the market for Alaskan salmon?

Price
Quantity Demanded
$30
300
$25
700
$20
1100
$15
1400
$10
1800

c. Refer to the combined U.S. and UK demand schedule, the U.S. demand schedule and the supply schedule, and analyze the change in the market for salmon .What will happen to the price at which fishermen can sell salmon? What will be the final output of salmon?

As the quantity demanded rises the price should decrease. Therefore if the fisherman wants to sell more salmon then they would sell at a lower price. With the new demand schedule the equilibrium price will still be $20.00 however the demand will be 1100 pounds of salmon. d. After UK joins the market demand for salmon, what will happen to the price U.S. consumers pay for salmon? What will happen to the quantity of salmon consumed by U.S. consumers?

The U.S. consumers will pay the same amount however the quantity supplied will increase. Meaning there would be a surplus in the U.S. 3) Assume Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fresh fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish.

Quantity of Potatoes (Pounds)
Quantity of Fish (Pounds)
A
1,000
0
B
800
300
C
600
500
D
400
600
E
200
650
F
0
675

Consider the maximum annual output of potatoes and fish indicated in the table above. The maximum output of the two products is also indicated on the Production Possibility Frontier graphs below. Answer the following questions from a – e using the information in the table and PPF graphs.

a. Is it feasible for Atlantis to produce 500 pounds of fish and 800 pounds of potatoes? Explain.
It is not feasible for Atlantis to produce 500 pounds of fish and 800 pounds of potatoes. This is because it is past the production possibility frontier. With the point being outside of the frontier shows that it is not possible for the country whether due to resources or personal or labor. b. Calculate the opportunity cost of increasing the annual output of potatoes from 800 to 1000 pounds.

The opportunity cost for increasing the potatoes output to 1000 pounds for be not being able to produce any fish. c. Calculate the opportunity cost of increasing the annual output of potatoes from 400 to 600 pounds.

The opportunity cost for increasing the potatoes output to 600 pounds would be only being able to produce 500 pounds of fish. This would be a loss of 100 pounds of fish. d. What is the difference between the answers to parts b and c?

The difference between parts b and c is that even though Atlantis is only changing the amount of potatoes that they produce by 200 pounds in each part the amount that fish goes down increases the more that the potatoes are increased. Just by changing it from 600 pounds to 800 pounds Atlantis would lose 200 pounds of fish. By increasing it then to the 1000 pounds would cause the decrease to 0 pounds of fish being produced. These numbers are different because when producing more potatoes the number of fish decreases by double the amount that it decreased by for the last amount. e. What does the change in opportunity costs indicate about the slope of the production possibility frontier?

The change in opportunity cost indicates that there will be movement along the current curve. It will not shift left or right.

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