These ten questions cover supply and equilibrium: movements and shifts, reading schedules, shortages and surpluses, double shifts and assumptions. Try each one on paper before opening the answer. Questions 1 to 4 are on the base schedule, 5 and 6 use new data, and 7 to 10 are harder.
The Port Merah lunch box schedule is used in questions 1 to 5, 8 and 9.
| Price (RM) | Quantity demanded | Quantity supplied |
|---|---|---|
| 10 | 90 | 20 |
| 15 | 75 | 40 |
| 20 | 60 | 60 |
| 25 | 45 | 80 |
| 30 | 30 | 100 |
1. State the equilibrium price and quantity.
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Quantity demanded equals quantity supplied at RM20, where both are 60. Equilibrium is RM20 and 60 boxes.
2. What is the gap at RM15, and what is it called?
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Demand 75 minus supply 40 is 35. Because demand is bigger, it is a shortage (excess demand) of 35 boxes.
3. What is the gap at RM30, and what pressure does it create on price?
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Supply 100 minus demand 30 is 70, a surplus. Sellers have unsold boxes, so the pressure is for the price to fall towards RM20.
4. Say whether each is a movement along a curve or a shift, and give the direction.
(a) The price rises from RM20 to RM25. (b) The price of plastic rises, so sellers offer 14 fewer boxes at every price. (c) A new school rule makes more students bring lunch boxes, so buyers want more at every price.
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(a) Movement along the supply curve. Quantity supplied extends from 60 to 80.
(b) Shift of supply to the left, a decrease in supply, because the cost of production rose.
(c) Shift of demand to the right, an increase in demand, because something other than price changed.
5. After the plastic cost rise in 4(b), quantity supplied becomes 6, 26, 46, 66 and 86 at the five prices. Find the new equilibrium price and quantity, using Qd = 120 − 3P.
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New supply is Qs = 4P − 34, since 4 × 20 − 34 = 46 matches. Set 120 − 3P = 4P − 34, so 7P = 154 and P = RM22. Quantity is 120 − 66 = 54. Check: 88 − 34 = 54. The price rises and the quantity falls.
6. Bukit Sari has a noodle market. Find the equilibrium and the gap at RM3.
| Price (RM) | Quantity demanded | Quantity supplied |
|---|---|---|
| 2 | 800 | 300 |
| 3 | 700 | 450 |
| 4 | 600 | 600 |
| 5 | 500 | 750 |
Show answer
Equilibrium is RM4 and 600 bowls. At RM3, demand 700 minus supply 450 is a shortage of 250 bowls.
7. In the noodle market, explain in a short paragraph what happens at RM5.
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At RM5, quantity supplied (750) exceeds quantity demanded (500), a surplus of 250 bowls. Stallholders have unsold stock, so they lower prices. As the price falls, quantity supplied contracts and quantity demanded extends, until at RM4 both are 600. The market is then in equilibrium.
8. Using Qd = 120 − 3P and Qs = 4P − 20, demand rises by 21 at every price and supply rises by 7 at every price. Find the new price and quantity, and compare with the original.
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Qd = 141 − 3P and Qs = 4P − 13. Setting equal: 7P = 154, so P = RM22. Quantity is 141 − 66 = 75. Check: 88 − 13 = 75. Compared with RM20 and 60, price rises and quantity rises. Quantity was always going to rise because both shifts were to the right. Price rose because the demand shift was larger.
9. For question 8, what could you say about price if you only knew that demand and supply both increased?
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Quantity would rise for certain, but price would be uncertain. It would depend on the relative size of the shifts. If demand grew more it would rise, if supply grew more it would fall, and if equal it would stay the same.
10. A student writes: “At RM15 there is a shortage, so the supply curve shifts right to fix it.” Identify the error, and state one assumption the corrected explanation depends on.
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The error is treating a shortage as a reason for a shift. At RM15 neither curve has moved. The price rises, quantity supplied extends along the same curve and quantity demanded contracts until both are 60 at RM20.
The corrected explanation assumes the price can rise freely and that no other factor, such as costs, changes at the same time.
If you got these wrong
- Questions 4, 5 or 10: confusing movements and shifts. Revisit distinguishing a supply shift from a price response.
- Questions 1, 2, 3 or 6: misreading the schedule. Revisit finding an equilibrium from supplied schedules.
- Questions 2, 3, 7 or 10: weak explanations of shortages and surpluses. Revisit explaining a shortage with a price adjustment model.
- Questions 8 or 9: claiming certainty about both price and quantity. Revisit tracing simultaneous shifts.
- Question 10: no assumption stated. Revisit stating an assumption behind the model.
The mistake log and retest queue can help you keep track of repeated errors. The percentage-base explorer is useful if percentage change questions appear alongside these.
If the same error returns after revision, online one-to-one Economics tuition gives you a teacher to find the cause and set new questions on it.