ECO100 Principles of Economics - Problem solving exercises end short report writing

Question 1

a. Draw a graph of the market for banana. What are the equilibrium price and quantity? Explain why [4 marks]
b. If the price of banana was $1.50 a box. What would be the situation in the banana market (shortage or surplus)? Explain why and how the price and quantity would adjust. [6 marks]
c. Suppose a cyclone destroyed some banana farms in OLD and the quantity of banana supplied decreased by 500 boxes a week at each price. Explain what would happen to the market supply and demand and how would the equilibrium price and quantity adjust? Illustrate the changes on your graph. [10 marks]
d. Suppose a cyclone decreased banana supply by 500 boxes a week at each price. But at the same time the demand for banana increased by 500 boxes a week at each price. Explain what would happen to the market equilibrium price and quantity? Illustrate the changes on your graph. [10 marks]