Price determination: Practice Questions

Which of the following best defines the term market equilibrium in economics?

The market for a specific type of mobile phone is in equilibrium. If there is a sudden increase in the cost of raw materials for production and simultaneously a celebrity endorsement increases consumer interest, what will be the certain effect on the equilibrium?

In the market for laptop computers, what is established at the point where the demand curve intersects the supply curve?

In a market for agricultural produce, what occurs when the current market price is set above the market equilibrium price?

The table shows the market demand and supply schedules for a type of fruit.

\(\begin{array}{|c|c|c|}\hline \text{Price per kg (\$)} & \text{Quantity Demanded (kg)} & \text{Quantity Supplied (kg)} \\ \hline 2.00 & 100 & 40 \\ \hline 2.50 & 80 & 60 \\ \hline 3.00 & 70 & 70 \\ \hline 3.50 & 50 & 90 \\ \hline \end{array}\)

What is the equilibrium price and quantity in this market?

In a particular market, the quantity supplied of a good is greater than the quantity demanded at the current price. Identify the economic term used to describe this specific market situation where there is downward pressure on the price.

The government decides to impose a minimum price (price floor) on agricultural products to protect farmers' incomes.
Analyze the effect of this policy on the market equilibrium if the price floor is set above the current equilibrium price, identifying whether a shortage or surplus will occur.

In a specific market, the quantity demanded for a product is exactly equal to the quantity supplied. Identify the economic term used to describe this specific market situation where there is no tendency for price to change.

The market for bottled water in a specific city is currently in equilibrium. The following table provides the demand and supply schedules for bottled water at different price levels.

Price per bottle (\$): 1.00, 1.50, 2.00, 2.50, 3.00
Quantity Demanded (units): 500, 400, 300, 200, 100
Quantity Supplied (units): 100, 200, 300, 400, 500

(a) Define the term 'market equilibrium'.
(b) Using the information in the table, identify the equilibrium price and the equilibrium quantity of bottled water.
(c) Explain what would happen to the market price if the price were currently set at \$1.50. Use the concepts of shortage or surplus in your explanation.

A small island nation produces only mangoes. The following demand and supply schedules represent the weekly market for mangoes:

Price per kg (\$): 2, 4, 6, 8, 10
Quantity Demanded (kg): 100, 80, 60, 40, 20
Quantity Supplied (kg): 20, 40, 60, 80, 100

(a) Define the term market disequilibrium.
(b) Using the data provided, identify the equilibrium price and the equilibrium quantity.
(c) Explain the market condition that would occur if the price were set at \$4 per kg, including the specific numerical value of the shortage or surplus.