ASSIGNMENT 3.

1: LAW OF DEMAND AND SUPPLY

RIVERA, EDWARD DANIEL S.
ARCH21S5
The market for pizza has the following demand and supply schedules:

Price Quantity Demanded Quantity Supplied

$4 135 pizzas 26 pizzas

5 104 53

6 81 81

7 68 98

8 53 110

9 39 121

a. Graph the demand and supply curves. What are the equilibrium price and quantity in this
market?
b. If the actual price in this market were above the equilibrium price, what would drive the
market toward the equilibrium?
c. If the actual price in this market were below the equilibrium price, what would drive the
market toward the equilibrium?

ANSWER:
The equilibrium price = $6 and the equilibrium quantity = 81 pizzas.
a.

The two curves showing quantity supplied and quantity demanded intersect at point E in the graph above. E
is the point of equilibrium, where the equilibrium price is $6 and there are 81 pizzas in the equilibrium
quantity.
b. The quantity provided would be greater than the quantity sought if the real price is higher than the
equilibrium price level ($6) since 98 > 68. To make their sales, the market's suppliers would lower the price to
$6. If not, there will be an oversupply of pizzas on the market.

c. The amount supplied would be less than the quantity sought if the real price was less than the equilibrium
price level ($6), as 53 104. The level of production from the market's providers will rise. Sales will rise to make
up for the scarcity, and prices will climb to their equilibrium level