Quantity Quantity

Demanded Supplied
Price/Case $30
$24 5000 18000
22 6000 17000 $25
20 7000 16000
18 8000 15000 $20
16 10000 14000
14 11000 13000
$15
12 12000 12000
10 13000 11000
$10
8 14000 10000
6 15000 9000
$5
4 16000 8000
2 17000 7000
$0
4000 6000 8000 10000 12000 14000 16000 1
 Demand
Supply

000 10000 12000 14000 16000 18000 20000

2) The law of demand states that, other things remaining constant, if the price of a
commodity increases, quantity demanded decreases. In this case also, we can observe
negative relationship between price and quantity demanded from the graph.
Similarly, law of supply states that other things remaining constant, if the price of a
commodity increases, then quantity supplied of that commodity also increases. This po
relationship can also be observed in our example
 constant, if the price of a
his case also, we can observe the
ded from the graph.
g constant, if the price of a
modity also increases. This positive
3) From the intersection of demand and supply, we will
get the equilibrium price and quantity. The equilibrium
price is $12 and the equilibrium quantity is 12000 units
$30

$25

$20

$15 Demand
Supply
$10

$5

$0
4000 6000 8000 10000 12000 14000 16000 18000 20000
4) If the government imposes a price floor of $16, then, there will be an excess supply. Since equilibrium
price was $12, an increase in price will reduce the demand while increase the quantity supplied. This will
lead to a situation of excess supply. From the graph below, we can see that the quantity demanded at price
$16 is 10000 and quantity supplied is 14000. Hence there will be an excess supply amounting to (14000 –
10000) = 4000

$30

$25

$20

$15
Demand
Supply
$10 P* = 16

$5

$0
 Quantity Quantity P* = 16 Q
ply. Since equilibrium Demanded Supplied
Price/Case 16 0
ity supplied. This will
$24 5000 18000 16 5000
ntity demanded at price
amounting to (14000 – 22 6000 17000 16 6000
20 7000 16000 16 7000
18 8000 15000 16 8000
16 10000 14000 16 10000
14 11000 13000 16 11000
12 12000 12000 16 12000
10 13000 11000 16 13000
8 14000 10000 16 14000
6 15000 9000 16 15000
4 16000 8000 16 16000
Demand 2 17000 7000 16 17000
Supply
P* = 16
5) If the government imposes a price ceiling of $8 instead, then, there will be an excess demand. From
the graph below, we can see that the quantity demanded at price $8 is 14000 and quantity supplied is
10000. Hence there will be an excess demand amounting to (14000 – 10000) = 4000

$30

$25

$20

$15
De
Su
$10 P*

$5

$0
ess demand. From Quantity Quantity P* = 8 Q
ntity supplied is Demanded Supplied
Price/Case 8 0
$24 5000 18000 8 5000
22 6000 17000 8 6000
20 7000 16000 8 7000
18 8000 15000 8 8000
16 10000 14000 8 10000
14 11000 13000 8 11000
12 12000 12000 8 12000
10 13000 11000 8 13000
8 14000 10000 8 14000
6 15000 9000 8 15000

Demand
4 16000 8000 8 16000

Supply 2 17000 7000 8 17000

P* = 8
If the prices fall by 50% then there will be an excess demand. Initially, the equilibrium price
was $12 where demand and supply were equal. if prices fall by 50% then at prie $6, quantity
demanded will be 15000 while quantity supplied will be 9000. Therefore there will be an
excess demand amounting to 6000. This excess demand will cause price to increase again.
This process will continue till demand matches supply. Thus the initial equilibrium will be
restored.

$30

$25

$20
Demand
Supply
$15
P =6
P* = 12
$10 Column M

$5

$0
0 5000 10000 15000 20000 25000
 Quantity Quantity Q P=6 P Q
he equilibrium price Demanded Supplied
Price/Case 0 6 12 12000
en at prie $6, quantity $24 5000 18000 5000 6 12 12000
e there will be an 22 6000 17000 6000 6 12 12000
to increase again.
quilibrium will be
20 7000 16000 7000 6 12 12000
18 8000 15000 8000 6 12 12000
16 10000 14000 10000 6 12 12000
14 11000 13000 11000 6 12 12000
12 12000 12000 12000 6 12 12000
10 13000 11000 13000 6 12 12000
8 14000 10000 14000 6 12 12000
6 15000 9000 15000 6 12 12000
4 16000 8000 16000 6 12 12000
Demand 2 17000 7000 20000 6 12 12000
Supply
0 12000
P =6
P* = 12
Column M
7) If the income of the consumers increases, then,
assuming the good is normal, the demand curve
will shift parallely right. Hence equilibrium price
and output will rise.
8) If the number of sellers decrease in the market, then quantity
supplied will fall. This will shift the supply curve parallely
upward. Hence equilibrium price will rise and output will fall.
9) Normal good is a good whose demand increases with increase of
consumers' income. On the otherhand, an inferior good is a good, whose
demand falls as income of the consumers rises. Therefore, if tablet cases
were inferior good, then an increase in the income of the consumers woud
lead to a fall in the demand for the product. this would make the demand
curve to shift parallely left instead of right.