Draw the supply and demand curves based on the following market data price .    quantiy demand.      quantity supplied 10               100                           012.                 80                         2014                60                           4016                 40                           6018                 20                            8020                 0                              100 What is the market equilibrium or clearing price?  What condition would prevail if the price is set at $12 by the government?   How would this affect the market efficiency (e.g production possibilities)? What is required to restore the market equilibrium or clearing process?

Question
Asked Mar 4, 2019
  • Draw the supply and demand curves based on the following market data 

price .    quantiy demand.      quantity supplied

 10               100                           0

12.                 80                         20

14                60                           40

16                 40                           60

18                 20                            80

20                 0                              100

 

What is the market equilibrium or clearing price?

 

What condition would prevail if the price is set at $12 by the government?  

 

How would this affect the market efficiency (e.g production possibilities)?

 

What is required to restore the market equilibrium or clearing process?



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Expert Answer

Step 1

Meaning of Demand:

Demand for the goods and services refers to the quantity which is the consumer is willing to buy at prevailing prices, in a given period of time. Basically, demand includes three essential elements: the price of commodity, quantity and time period.

Step 2

The market equilibrium or clearing price exists where quantity demanded is equal to the quantity supplied. Here the equilibrium price is $ 15 and the equilibrium Quantity is 50 units.

With the price ceiling of $ 12 consumer would like to buy more than the equilibrium output that is 80 units...

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