The table shows the demand and supply schedules for milk A d

The table shows the demand and supply schedules for milk. A drought decreases the quantity supplied by 90 cartons a day at each price Quantity demanded Quantity supplied Price (dollars per carton) 1.00 1.25 1.50 1.75 2.00 (cartons per day) At the initial equilibrium price, there is a | of milk. 400 350 300 250 200 220 260 300 340 380 and the quantity of cartons demanded The price of a carton moves to its new equilibrium. OA, falls; decreases OB, rises; increases C. rises, decreases OD, falls; increases as the market The new equilibrium price is day a carton and the new equilibrium quantity is cartons a

Solution

At the initial equilibrium price, quantity demanded equals quantity of milk supplied. The initial equilibrium price is $1.50 per gallon and the quantity demanded is 300 cartons per day and quantity supplied is 300 cartons per day.

The drought causes the supply curve to shift to the left by 90 cartons per day of milk. The demand remains the same. The new equilibrium price rises and the new equilibrium quantity decreases. The new equilibrium price is $1,75 and new equilibrium quantity is 250 cartons per day.

New equilibrium
Price ( Dollars per carton)	Quantity demanded	Old Quantity supplied	New quantity ( old quantity - 90 cartons)
	Cartons per day
1.00	400	220	130
1.25	350	260	170
1.50	300	300	210
1.75	250	340	250
2.00	200	380	290