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SS1: Economics – Theory of Demand & Supply II | Theory Questions

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Question 1

The following table shows the number of oranges that would be bought and sold at the prices shown:

Price (₦) per orange Quantity of oranges sold Quantity of oranges bought
10 1000 400
8 800 500
6 600 600
4 400 700
2 200 1000

 

(a) What is the equilibrium price and quantity?

Answer – The equilibrium price is 6 and the equilibrium quantity is 600 units.

(b) At what price does the market exhibit excess demand?

Answer  Excess demand = Qd –Qs

4, excess demand 700-400 = 300units

2, excess demand 1000-200 = 800units

(c) At what price does the market exhibit excess supply?

Answer – Excess supply = Qs – Qd

10, excess supply 1000 – 400 = 600units

8, excess supply 800 – 500 = 300units

Question 2

State the law of supply

The law of supply states that the higher the price of a commodity, the higher the quantity supplied or vice versa

Question 3

With illustration explain the supply Schedule. 

Supply schedule: It is a table that shows the quantity of a commodity that is offered for sale at any given price and at a given period of time. This is illustrated as shown below:

Supply schedule for orange

Price () Quantity supplied (kg)
5 500
4 400
3 300
2 200
1 100

 

From the table above, it can be seen that more oranges were supplied at a higher price than at a lower price.

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