Exercise 3-2: Market Equilibrium

This weeks Assignment was to answer a self-test problem given in our textbook "Principles of Microeconomics" Edition 6 by Sayre and Morris.

The idea was to get a graph, showing the shortage and surplus of eggs demanded and supplied, in hundreds per day. Given were the following information:

Price: Quantity demanded: Quantity supplied:

$2.00 60 30

$2.50 56 36

$3.00 52 42

$3.50 48 48

$4.00 44 54

Obviously, the market would be at an equilibrium at a price of $3.50. At this price, demand equals supply at 4,800 eggs. If the price would go above $3.50, there would be a surplus, as more eggs get supplied than demanded. On the other extreme, as the price drops below $3.50, there will be a shortage in eggs, as the demand will increase and the supply decrease.

The graph, displaying this information would look like this:

I have also added a second graph, showing the shortage or surplus at each price: