Studyledge

Market Equilibrium and Price Changes: Question 6

Syllabus 2.4

Multiple choice 1 mark

A market stall records the following demand and supply schedule for wireless phone chargers, showing the quantity that customers want to buy and the quantity that sellers want to offer each week at different prices.

Price ($) Quantity demanded (hundreds of chargers per week) Quantity supplied (hundreds of chargers per week)
8 60 20
10 50 30
12 40 40
14 30 50

The stall currently prices chargers at $14. Using the table, what is the size and type of the imbalance between quantity demanded and quantity supplied at this price?

Choose an answer to check it, then compare with the worked solution below.
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Worked solution

Step 1: Find the equilibrium price first, for reference

Checking each row for where Qd = Qs: at $12, quantity demanded (40 hundred) equals quantity supplied (40 hundred), so $12 is the equilibrium price. Since the stall is charging $14, which is above equilibrium, we should expect a surplus (excess supply), not a shortage.

Step 2: Read the quantities at $14

From the table, at a price of $14:

  • Quantity demanded =30= 30 hundred chargers per week
  • Quantity supplied =50= 50 hundred chargers per week

Step 3: Calculate the size of the imbalance

Quantity supplied is greater than quantity demanded, so this is a surplus: 50−30=20 (hundreds of chargers)50 - 30 = 20 \text{ (hundreds of chargers)}

Converting hundreds into an actual number of chargers: 20×100=200020 \times 100 = 2000

Step 4: Rule out the other options

  • Option B reverses the direction: quantity supplied exceeds quantity demanded at $14, so this is a surplus, not a shortage.
  • Options C and D understate the size of the imbalance by a factor of two, likely from misreading one of the two quantity columns.

Final answer

At $14, there is a surplus of 2000 chargers per week, option A.