Question

The table shows the demand and supply schedules for boxes of chocolates in an average week.

Use this information to answer problems
a) If the price of chocolates is $17.00 a box, describe the situation in the market. Explain how market equilibrium is restored.

b) During Valentine's week, more people buy chocolates and chocolates offer their chocolates in special red boxes, which cost more to produce than the everyday box. Set out the three-step process of analysis and show on a graph the adjustment process to the new equilibrium. Describe the changes in the equilibrium price and the equilibrium quantity.​

Answer 1

Answer:

a) if the box of chocolate is priced at $17, then the supply is more than the demand as cann be seen from the data.

demand : 1200 boxes

supply : 1600 boxes

there is an over supply of 1600-1200 = 400 boxes

the situation can be rectified by either

1. reducing supply

2. reducing price per box

As can be seen from the data the equilibrium is reached when the box price is $14/boxm

b) the above explanation is true for Valentine's also where a price and supply & demand situation can be seen .

A justifiable price will dictate the supply and demand parameters.