6 The table below provides information on the quantity of la

6) The table below provides information on the quantity of laptops supplied and demanded in a market at various prices. Consider this information and answer the following questions. Price Qs 300,000 400,000 500,000 600,000 700,000 800,000 900,000 Qp $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 1,100,000 1,000,000 900,000 800,000 700,000 600,000 500,000 a) What is the equilibrium price of a laptop in this market? How do you know that it is the equilibrium price? b) Suppose the government set a minimum laptop price of $1,300 in an attempt to help laptop makers. How many more or fewer laptops would consumers purchase compared to the number they purchased at equilibrium? c) Will the market experience a shortage or surplus of laptops, and how large will it be? d) Suppose the government establishes a new minimum laptop price of $1,000. What will the new price of a laptop be in this market? Why?

Solution

a) Equilibrium occurs when quantity supplied=quantity demanded. Here Qs=Qd when the price is $1200. So the equilibrium price is $1200 and the equilibrium quantity is 700,000.

b) At $1300, Qs=800,000 and Qd=600,000. Here supply of laptop is increased by (800000-700000)=100000. So consumers can buy 100000 more laptops.

c) As at $1300, supply is more than demand so there is a surplus of laptops. The surplus amount is (800000-600000)=200000 laptops.

d) New minimum laptop price is $1000. At this price Qs=50000 and Qd=900000. So Qs<Qd. New laptop price will be $1000 but there will be a shortage of laptops on the market.