Economics - Market for banana

Running head: ECONOMICS
Economics
Name of the Student
Name of the University
Course ID

ECONOMICS1
Table of Contents
Question 1..................................................................................................................................2
Question a...............................................................................................................................2
Question b..............................................................................................................................2
Question c...............................................................................................................................3
Question d..............................................................................................................................3
Question 2..................................................................................................................................5
Question a...............................................................................................................................5
Question b..............................................................................................................................5
Question c...............................................................................................................................6
Question d..............................................................................................................................7
Question e...............................................................................................................................7
Question 3..................................................................................................................................9
Introduction............................................................................................................................9
Income and cross price elasticity of bicycle demand.............................................................9
Factors affecting bicycle demand.........................................................................................10
Conclusion............................................................................................................................10
References................................................................................................................................11

ECONOMICS2
Question 1
Question a
Figure 1: Market for banana
The price of bananas at equilibrium is approximately equals $2.5 per box. The
quantity of banana at equilibrium is nearly equals 2250 boxes. Equilibrium in the market
occurs where market demand equals market supply. At the given price and quantity of
bananas, quantity supplied of bananas equal the quantity demanded.
Question b
When banana’s price is at $1.50, then the price is below the equilibrium price. At a
price below market equilibrium, demand for bananas per box exceeds that of supply. This
results in a shortage of bananas in the market. With a shortage in the market, sellers tend to
increase price to eliminate some buyers from the market (Fine 2016). Price of banana
continue to increase unless supply and demand balances in the market.

ECONOMICS3
Question c
Figure 2: Impact of cyclone on banana market
Because of cyclone, the supply of banana lessened by 500 boxes. This shifts the
supply curve of banana inward leaving the demand same. Because of a decrease in supply of
bananas, equilibrium shifts up from E to E1. At the new equilibrium, price of bananas increase
to $3 and equilibrium quantity of bananas decreases to 2000 boxes per week.
Question d
Figure 3: Combined effect of demand and supply change on the banana market