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Question
Microeconomics
Posted 9 months ago

The market for blankets is shown here.

Which of the following explains why $7\$ 7 is not an equilibrium price in the market for blankets?

Choose 1 answer:
(A) The quantity demanded is greater than the quantity supplied
(B) The quantity supplied is greater than the quantity demanded
(c) The supply is greater than the demand
(D) The demand is greater than the supply
(E) The quantity demanded and quantity supplied are equal
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Answer from Sia
Posted 9 months ago
Solution
a
Equilibrium Price: The equilibrium price is where the quantity demanded equals the quantity supplied. In this graph, the equilibrium price is $8, where the demand and supply curves intersect
b
Quantity Demanded at 7:Atapriceof7: At a price of 7, the quantity demanded is 4 blankets, as indicated by the intersection of the dotted line with the demand curve
c
Quantity Supplied at 7:Atapriceof7: At a price of 7, the quantity supplied is 5 blankets, as indicated by the intersection of the dotted line with the supply curve
d
Comparison: Since the quantity supplied (5 blankets) is greater than the quantity demanded (4 blankets) at the price of $7, there is a surplus of 1 blanket
Answer
(B) The quantity supplied is greater than the quantity demanded
Key Concept
Equilibrium Price
Explanation
The equilibrium price is the price at which the quantity demanded equals the quantity supplied. At 7,thequantitysuppliedexceedsthequantitydemanded,creatingasurplus,whichmeans7, the quantity supplied exceeds the quantity demanded, creating a surplus, which means 7 is not the equilibrium price.

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