Questions

Asked By :  Tim Winton
Answers1

The following table below shows the demand and supply

The following table (below) shows the demand and supply schedules for school shoes.

Q3 ai). What would be the equilibrium price (Pe) and quantity (Qe) for school shoes?

Q3 aii). If the price of school shoes dropped to $60 per pair, would this result in a shortage or a surplus? What's the size of this?

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Question 3b: Most public schools started to allow students to wear running shoes to school, how would this affect the supply or demand for school shoes? Ans: (6 marks or 0 mark)

Q3 bi). The supply or demand curve. (Highlight the correct answer).

Q3 bii). it will shift to the left or right. (Highlight the correct answer).

Q3 biii). the equilibrium price would rise or fall. (Highlight the correct answer).

Q3 biv). the equilibrium quantity would rise or fall. (Highlight the correct answer).

price quantity quantity dollars demanded supplied per pair pairs per day 60 1000 400 70 900 500 80 800 600 90 700 700 100 600 800 10 500 900



Answers :

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Q3 ai). Equilibrium Price (Pe) and Quantity (Qe) for School Shoes

The equilibrium price and quantity are determined where the quantity demanded equals the quantity supplied. From the given table, this occurs at:

  • Price: $90 per pair
  • Quantity demanded: 700 pairs per day
  • Quantity supplied: 700 pairs per day

Therefore, the equilibrium price (Pe) is $90 per pair, and the equilibrium quantity (Qe) is 700 pairs per day.

Q3 aii). Impact of a Price Drop to $60 per Pair

At $60 per pair:

  • Quantity demanded: 1,000 pairs per day
  • Quantity supplied: 400 pairs per day

This results in a shortage because the quantity demanded exceeds the quantity supplied.

  • Shortage size = Quantity demanded - Quantity supplied
  • Shortage size = 1,000 pairs - 400 pairs = 600 pairs

Hence, there would be a shortage of 600 pairs.

Q3 b: Effect of Allowing Students to Wear Running Shoes

Q3 bi). A change in public school policy allowing students to wear running shoes would affect the demand curve for school shoes, as students might prefer running shoes over school shoes.

Q3 bii). The demand curve will shift to the left, indicating a decrease in demand for school shoes.

Q3 biii). With a decreased demand, the equilibrium price would fall.

Q3 biv). With a decreased demand, the equilibrium quantity would fall.


Answered By

Harriet Payne

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