End Of CH Que NO: 1

The weekly demand and supply schedules for t-shirts (in millions) in a free market are as follows:\n\n\n\n\n\nPrice (£)\n\n\n8\n\n\n7\n\n\n6\n\n\n5\n\n\n4\n\n\n3\n\n\n2\n\n\n1\n\n\n\n\n

The weekly demand and supply schedules for t-shirts (in millions) in a free market are as follows:

\r\n
\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
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Price (£)

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\r\n

8

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7

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6

\r\n
\r\n

5

\r\n
\r\n

4

\r\n
\r\n

3

\r\n
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2

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1

\r\n
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Quantity demanded

\r\n
\r\n

6

\r\n
\r\n

8

\r\n
\r\n

10

\r\n
\r\n

12

\r\n
\r\n

14

\r\n
\r\n

16

\r\n
\r\n

18

\r\n
\r\n

20

\r\n
\r\n

Quantity supplied

\r\n
\r\n

18

\r\n
\r\n

16

\r\n
\r\n

14

\r\n
\r\n

12

\r\n
\r\n

10

\r\n
\r\n

8

\r\n
\r\n

6

\r\n
\r\n

4

\r\n
\r\n
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         (a)  What are the equilibrium price and quantity?

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         (b)  Assume that changes in fashion cause the demand for t-shirts to rise by 4 million at each price. What will be the new equilibrium price and quantity? Has equilibrium quantity risen as much as the rise in demand? Explain why or why not.

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         (c)  Now plot the data in the table and mark the equilibrium. Also plot the new data corresponding to (b).

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