Using diagrams the likely effect on the market for

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Using diagrams, the likely effect on the market for traditional butcher services,

Draw a diagram that shows the main macroeconomic flows in the economy. Identify all components of the diagram.

The weekly demand and supply schedules for t-shirts (in millions) in a free market are as follows:

Price (£)

8

7

6

5

4

3

2

1

Quantity demanded

6

8

10

12

14

16

18

20

Quantity supplied

18

16

14

12

10

8

6

4

  • What is the equilibrium price and quantity?
  • Assume that changes in fashion cause the demand for tshirts to rise by 4 million at each price. What will be the new equilibrium price and quantity?
  • Why does the equilibrium quantity increase differ from the increase in demand?
  • Now plot the data in the table on a graph and show the equilibrium. Also plot the new data corresponding to your answer in part (b).
  • Referring to the original data, what is the price elasticity of demand between a price of £7 and a price of£5? Is it elastic or inelastic?

 

Reference no: EM13373812

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