Demand and supply diagram for the banana market Question Answer 2022

Running head: ECONOMICS
ECONOMICS
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Table of Contents
Answer to Question: 1.....................................................................................................................3
Part (a).........................................................................................................................................3
Part (b).........................................................................................................................................4
Part (c).........................................................................................................................................4
Part (d).........................................................................................................................................5
Answer to Question: 2.....................................................................................................................7
Part (a).........................................................................................................................................7
Part (b).........................................................................................................................................8
Part (c).........................................................................................................................................9
Subpart (i)..............................................................................................................................10
Subpart (ii).............................................................................................................................10
Part (d).......................................................................................................................................10
Part (e).......................................................................................................................................11
Answer to Question: 3...................................................................................................................12
Reference List................................................................................................................................15

Answer to Question: 1
Part (a)
Figure 1: Demand and supply diagram for the banana market
Source: As created by the author
The equilibrium price and output is denoted by the pint where the quantity demanded by
the buyers is equal to the quantity demanded by the suppliers. Demand and price are inversely
related to each pother such that a rise in price leads to a fall in quantity demanded. Price and
supply curve is positive related such that a rise in price helps the enables suppliers to produce
more output. Equilibrium occurs at the point where the price and quantity matches with suppliers
and customers. The orange line denotes the supply curve and blue denotes the demand curve
which intersects at a definite point. The corresponding price and output are 2.5 dollars and 2250
boxes per week.

Part (b)
Figure 2: Change in equilibrium price and output when price is set at 1.5 dollars
Source: (As created by the Author)
When the price of banana is fixed at 1.5 dollars a box, then quantity demanded exceeds
the quantity supply. The quantity demanded remains fixed at 1500 box each week, whereas the
quantity supplied remains at 2750 boxes each week (Zeegers, T., 2015). This is because when
prices go down, there is an increase in the quantity demanded, but producers are unable yo
produce at such low price. Therefore, this price creates a shortage in the market.
Part (c)
Cyclone has destroyed the banana farms which has significantly changed the banana
supply. The quantity supplied decreased by 500 boxes at each level of price and according the
equilibrium price and output is denoted.