|
14. Remember that total quantity exchanged on the market is largest at the equilibrium price. We know that $2.50 is below the equilibrium price.
At $2.50, the quantity demanded will be around 93, and the quantity supplied will be around 63, so actual consumption will also be 63. Consumers can't consume ice cream that suppliers won't sell them. At $2.50 demand is greater than supply, so the price will rise. As the price increases, quantity supplied will increase. Even though desired quantity demanded will be falling, total consumption will be increasing due to the increased supply available. At equilibrium, quantity demanded and supplied will be somewhat above 85. Therefore, the total quantity consumed and the price both increase.
|
| Supply and Demand for Ice Cream |
| Price |
Q. Demanded |
Q. Supplied |
| $1.00 |
100 |
25 |
| $2.00 |
95 |
50 |
| $3.00 |
90 |
75 |
| $4.00 |
85 |
100 |
| $5.00 |
80 |
125 |
|
