5. Suppose we have the demand and supply schedule for ice cream in the free market:
$4
Price Quantity Demanded(Quarts) Quantity Supplied(Quarts)
$6
20
90
60
60
$2
100
30
Please answer questions Sa through 5e below:
5a. Draw the demand and supply curves for ice cream and label
price on the y-axis and quantity on the x-axis. Label the demand
curve D and the supply curve S.
5bWhat is the equilibrium price and equilibrium quantity of ice
cream? Why?
Sc. At a price of $2, do we have a shortage or a surplus of ice
cream? Explain why we have a shortage or a surplus of ice cream. What will
the ice cream company do to get back to the equilibrium price?
5d. At a price of $6, do we have a shortage or a surplus of ice
cream? Explain why we have a shortage or a surplus of ice cream.
What will the ice cream company do to get back to the
equilibrium price?
5e. Calculate the consumer surplus and the produce surplus at the
equilibrium price. Also, what is the total surplus at the
equilibrium price? Label and shade Consumer Surplus (CS) and
Producer Surplus (PS) on the graph at the equilibrium price and
quantity.