Using diagrams, the likely effect on the market for traditional butcher services,
Draw a diagram that shows the main macroeconomic flows in the economy. Identify all components of the diagram.
The weekly demand and supply schedules for t-shirts (in millions) in a free market are as follows:
|
Price (£)
|
8
|
7
|
6
|
5
|
4
|
3
|
2
|
1
|
|
Quantity demanded
|
6
|
8
|
10
|
12
|
14
|
16
|
18
|
20
|
|
Quantity supplied
|
18
|
16
|
14
|
12
|
10
|
8
|
6
|
4
|
- What is the equilibrium price and quantity?
- Assume that changes in fashion cause the demand for tshirts to rise by 4 million at each price. What will be the new equilibrium price and quantity?
- Why does the equilibrium quantity increase differ from the increase in demand?
- Now plot the data in the table on a graph and show the equilibrium. Also plot the new data corresponding to your answer in part (b).
- Referring to the original data, what is the price elasticity of demand between a price of £7 and a price of£5? Is it elastic or inelastic?