The following table shows the demand and supply schedules for potato chips. Price (cents per bag) Quantity demanded Quantity supplied (Millions of bags per week) 50 16 11 60 15 12.5 70 14 14 80 13 15.5 90 12 17 100 11 18.5 (i) Draw a graph of the potato chip market and show the equilibrium price and quantity exchanged. (ii) If the price is 90 cents a bag, is there a shortage or a surplus, and how does the price adjust? (iii) A new dip increases the quantity of potato chips that people want to buy by 2.5 millions bags per week at each price. (a) Does the demand for chips change or the supply of chips change? Why? (b) How do the equilibrium price and the equilibrium quantity exchange change? Explain and show in above diagram. (iv) If a virus destroys potato crops and the quantity of potato chips produced decreases by 2.5 millions bag a week at each price. (a) Does the demand for chips change or the supply of chips change? Why? (b) How do the equilibrium price and the equilibrium quantity exchange change? Explain and show in above diagram. (v) If the virus hits just as the new dip comes onto the market, how do the equilibrium price and equilibrium quantity exchange of chips change? Explain and show in above diagram.
Economics
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