A farmers' market stall records the following demand and supply schedule for punnets of strawberries, showing the quantity buyers want to purchase and the quantity sellers want to offer each week at different prices. Price ($) Quantity demanded (punnets per week) Quantity suppli…

Answer: ((a)) Market equilibrium is the price at which quantity demanded exactly equals quantity supplied; from the table this is $4.00, where both quantity demanded and quantity supplied equal 400 punnets per week ((b)) At $4.50, quantity supplied (500 punnets) is greater than quantity demanded (300 punnets), so there is a surplus of 200 punnets per week ((c)) Because there is a surplus at $4.50, sellers are left with unsold strawberries, so they cut the price to clear their stock; as price falls, quantity demanded rises (an extension in demand) and quantity supplied falls (a contraction in supply), until the two become equal at the e…. Part (a): Defining and finding equilibrium Market equilibrium is the price at which the quantity that buyers want to purchase exactly equals the quantity that sellers want to offer. That is, quantity demanded (Qd) = quantity supplied (Qs).…

IGCSE Economics 0455: Equilibrium, Surplus and Price Adjustment in a Strawberry Market

Price ($)	Quantity demanded (punnets per week)	Quantity supplied (punnets per week)
3.00	600	200
3.50	500	300
4.00	400	400
4.50	300	500
5.00	200	600

Price ($)

Quantity demanded (punnets per week)

Quantity supplied (punnets per week)

3.00

600

200

3.50

500

300

4.00

400

4.50

300

500

5.00

200

600

Part (a): Defining and finding equilibrium

Market equilibrium is the price at which the quantity that buyers want to purchase exactly equals the quantity that sellers want to offer. That is, quantity demanded (Qd) $=$ quantity supplied (Qs).

Checking each row of the table:

Price	Qd	Qs
$3.00	600	200
$3.50	500	300
$4.00	400	400
$4.50	300	500
$5.00	200	600

Only at $4.00 does quantity demanded equal quantity supplied, both at 400 punnets per week. This is the equilibrium price and equilibrium quantity.

Part (b): Identifying the surplus at $4.50

At $4.50, from the table:

Quantity demanded $= 300$ punnets per week
Quantity supplied $= 500$ punnets per week

Since quantity supplied is greater than quantity demanded, there is a surplus (excess supply): $500 - 300 = 200 \text{ punnets per week}$

Part (c): How price adjusts back to equilibrium

At $4.50, the surplus of 200 punnets per week means the stall is left with strawberries it cannot sell. Unsold strawberries are perishable and lose value the longer they sit unsold, so the stallholder is willing to cut the price to clear the surplus, pushing price downward.

As price falls below $4.50:

Quantity demanded rises, an extension in demand, as more buyers are willing to purchase strawberries at the lower price.
Quantity supplied falls, a contraction in supply, as the stall is willing to offer fewer strawberries at the lower price.

This process continues until price reaches $4.00, where quantity demanded and quantity supplied are both 400 punnets per week and the surplus has been eliminated. At that point there is no further pressure for price to change, so the market has reached equilibrium.

Final answers

(a) Market equilibrium is where quantity demanded $=$ quantity supplied; here, equilibrium price $=$ $4.00, equilibrium quantity $=$ 400 punnets per week.
(b) At $4.50 there is a surplus of 200 punnets per week (500 supplied vs. 300 demanded).
(c) The surplus bids price downward from $4.50; demand extends and supply contracts along the existing curves until price reaches $4.00, where the surplus disappears.