Questions: Suppose the accompanying graph depicts a market for one pound bags of candy. Place the line labeled Excess Demand at a price that would generate an excess demand, or shortage. Then, determine the size of the excess demand. Excess Demand =

Suppose the accompanying graph depicts a market for one pound bags of candy. Place the line labeled Excess Demand at a price that would generate an excess demand, or shortage. Then, determine the size of the excess demand.

Excess Demand =

Transcript text: Suppose the accompanying graph depicts a market for one pound bags of candy. Place the line labeled Excess Demand at a price that would generate an excess demand, or shortage. Then, determine the size of the excess demand. Excess Demand = $\square$

Solution

Solution Steps

Step 1: Identify the Equilibrium Point

Locate the point where the supply and demand curves intersect on the graph. This is the equilibrium point where the quantity supplied equals the quantity demanded.

Step 2: Determine the Price Level for Excess Demand

Identify a price level above the equilibrium price. This is where the quantity demanded exceeds the quantity supplied, creating excess demand.

Step 3: Calculate the Excess Demand

At the chosen price level, find the quantity demanded and the quantity supplied.
Subtract the quantity supplied from the quantity demanded to determine the excess demand.