Graph Input Too Market for Shrts DOLL Solution The equilibri

Graph Input Too Market for Shrts DOLL

Solution

• The equilibrium price of this market is $40/ shirt. And the equilibrium quantity is 250 shirts bought and sold per month.

(Market equilibrium occurs at the point where both demand and supply cross each other)

• At price $32 per shirt,

Demand exceeds supply. So it is a shortage.

Shortage amount= quantity demanded at this price - Quantity supplied at this price

=(275-200)= 75 shirts

Since, it\'s a shortage Therefore consumers are not able to buy as much as they want . Considering the situation and to earn more profit(as demand exceeds the supply), producers will increase the price and quantity both. There will be a upward pressure on prices.

• at price $48 per shirt,

Supply exceeds demand. Therefore it\'s a surplus.

Surplus amount = no. Of shirts supplied - no. Of shirts demanded. = 275 - 225 = 50 shirts.

When supply exceeds the demand, firms will lower the price in order to stay competitive. Thus there will be a downward pressure on the price.