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Demand and supply schedules for potato chips

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Reference no: EM133084420

The demand and supply schedules for potato chips are given as follows:

a. Draw a graph of the potato chip market. What is the equilibrium price and quantity of potato chips?

b. If the price of potato chips per bag is Rp 6,000, will there be any shortage or surplus? Explain.

c. If a new dip increases the quantity of potato chips that people want to buy by 40 million bags per week at each price, how will the demand for chips change?

d. Suppose a virulent virus destroys potato crops and, as a result, cut the quantity of potato chips produced by 20 million bags a week at each price, how does the supply of chips change?

e. If the two events (a new dip increases the quantity of potato chips that people want to buy by 40 million bags per week and a virulent virus cuts the quantity of chips produced by 20 million bags per week, both at each price) occur at the same time, how does the price and quantity of chips change?

f. Do you agree or disagree with each of the following statements? Briefly explain your answers.

1. An increase in the demand for potato chips causes its price to rise. Higher price of potato chips will cause the demand for potato chips to fall and, therefore, will cause its price to fall back to its original level.

2. If both the demand for and the supply of potato chips increase at the same time, the price of potato chips will surely rise.

Reference no: EM133084420

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