Question:
The table shows daily supply and demand for green leaves. [P: 60, 55, 50, 45, 40; QD: 220, 240, 260, 280, 300; QS: 310, 300, 290, 280, 270]. Suppose supply falls by 60 kg at all prices. What is the new equilibrium price?
(1) Rs. 60
(2) Rs. 55
(3) Rs. 50
(4) Rs. 45
(5) Rs. 40
Correct Answer:
(2)
Answer Explanation:
Create the new supply schedule by subtracting 60 from every $Q_S$ value. The new $Q_S$ values are: 250 (at P=60), 240 (at P=55), 230, 220, 210. Find where the new $Q_S$ matches $Q_D$. At P=55, $Q_D$ is 240 and the new $Q_S$ is 240. The market clears at Rs. 55.
Topic: Market Equilibrium Year: 2021
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