Market Supply And Demand Schedules For Bicycles Money Worksheet With Answer Key Page 2
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2
3
4b.
What is the equilibrium price of bicycles?
Answer:
€300
c.
What is the equilibrium quantity of bicycles?
Answer:
50 bicycles
d.
If the price of bicycles were €100, is there a surplus or a shortage?
How many units of surplus or shortage are there? Will this cause the
price to rise or fall?
Answer:
Shortage, 70 – 30 = 40 units, the price will rise
e.
If the price of bicycles were €400, is there a surplus or a shortage?
How many units of surplus or shortage are there? Will this cause the
price to rise or fall?
Answer:
Surplus, 60 – 40 = 20 units, the price will fall
f.
Suppose that the bicycle maker's labour union bargains for an increase
in its wages. Further, suppose this event raises the cost of production,
makes bicycle manufacturing less profitable, and reduces the quantity
supplied of bicycles by 20 units at each price of bicycles. Plot the new
supply curve and the original supply and demand curves in Exhibit 2.
What is the new equilibrium price and quantity in the market for
bicycles?
Exhibit 2
Answer:
See Exhibit 4. equilibrium price = €400, equilibrium quantity = 40 bicycles
Exhibit 4
Practice Questions to accompany Mankiw & Taylor: Economics
2
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