The following graph shows the monthly demand and supply curves in the market for

Question

The following graph shows the monthly demand and supply curves in the market for shirts Use the graph input tool to help you answer the following questions. Enter an amount into the Price field to see the quantity demanded and quantity supplied at that price. You will not be graded on any changes you make to this graph Graph Input Tool Market for Shirts Price (Dollars per shirt) 24 Quantity Demanded Shirts) Quantity Supplied Shirts) 500 0 Supply E 56 40 Demand 16 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Shirts) The equilibrium price in this market is $50 per shirt, and the equilibrium quantity is 250 shirts bought and sold per month Complete the following table by indicating at each price whether there is a shortage or surplus in the market, the amount of that shortage or surplus, and whether this places upward or downward pressure on prices Price (Dollars per shirt) 32 48 Shortage or Surplus Amount (Shirts) Shortage or Surplus Pressure

Explanation / Answer

Answer:- The equilibrium occurs at the point where the demand curve intersects supply curve and at this point quantity demanded is equal to quantity supply.

So equilibrium price is $40 and equilibrium quantity is 250 shirts.

At price 32, there will be shortage of 250 shirts (375-125) because demand is greater that supply of shirts, as a result there will be upward pressure on prices.

At Price $48, there will be surplus of 250 shirts because supply of shirts is more than demand, as a result there will be downward pressure on prices.

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