Microeconomics: Equilibrium, Price Elasticity of Demand, and Cross Elasticity of Demand

MICROECONOMICS
STUDENT ID:
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Question 2
a) Equilibrium is attained when the demand and supply become equal. From the given
demand and supply schedule, it is apparent that at price of RM 9, the quantity demanded and
quantity supplied are the same which highlights existence of equilibrium.
Hence, equilibrium price = RM 9
Quantity received at equilibrium = 20 tonnes
Revenue at equilibrium = 20*9 = RM 180
b) Now there would be a change in demand and supply schedule as for each of the price, the
demand of rice would decrease by 7 tonnes. The revised demand and supply schedule is
given below.
Price
(RM)
Quantity
Demanded
Quantity
Supplied
3 21 14
6 17 17
9 13 20
12 9 23
15 5 26
18 1 29
It is apparent that now there is a change in the equilibrium condition as highlighted.
Hence, equilibrium price = RM 6
Quantity received at equilibrium = 17 tonnes
c) New revenue = RM 6 * 17 = RM 102
It is apparent that the revenue has decreased in comparison to the previous revenue of RM
180.