Evaluate equilibrium outcomes and market adjustment using diagrams, assumptions and evidence about prices, quantities and stakeholders.
Note that widgets and pidgets are imaginary products.
In the country of Burbia, the demand and supply of widgets are given by the functions
where Qd is the quantity demanded per month, Qs is the quantity supplied per month and P is the price per widget in dollars ($).
Calculate the equilibrium price and quantity per month.
249-4 P=150+14 P
99=18 P
Any valid working is sufficient for [1].
P=$5.50, Q=227
An answer of 5.50, 227 (without working) is sufficient for [1].
Calculate the excess demand/excess supply (state which of these) at a price of $8.50.
Qd=249−4×8.50=215
Qs =150+14×8.50=269
Any valid working is sufficient for [1].
There will be excess supply or a surplus of 54 .
An answer of 54 (without working) is sufficient for [1].
Calculate the price at which excess demand of 18 widgets would result.
A demand curve is drawn under the assumption of ceteris paribus.
Calculate the price at which excess demand of 18 widgets would result.
249-4 P=150+14 P+18
81=18 P
Any valid working is sufficient for [1].
P=$4.50
An answer of 4.50 (without working) is sufficient for [1].
With reference to demand and supply in competitive markets, explain how the economic question "what to produce" is answered.
Answers may include:
- definitions of demand, supply, competitive markets
- diagram(s) to show demand and supply and the price mechanism
- explanation of how scarcity and opportunity cost necessitates choices and how the price mechanism works to provide incentives
- examples of choices and price mechanism at work.
Assessment Criteria
Part (a) 10 marks
Level ..... Marks
0 The work does not meet a standard described by the descriptors below. ..... 0
1 There is little understanding of the specific demands of the question. Relevant economic terms are not defined. There is very little knowledge of relevant economic theory. There are significant errors. ..... 1-3
2 There is some understanding of the specific demands of the question. Some relevant economic terms are defined. There is some knowledge of relevant economic theory. There are some errors. ..... 4-6
3 There is understanding of the specific demands of the question. Relevant economic terms are defined. Relevant economic theory is explained and applied. Where appropriate, diagrams are included and applied. Where appropriate, examples are used. There are few errors. ..... 7-8
4 There is understanding of the specific demands of the question. Relevant economic terms are clearly defined. Relevant economic theory is clearly explained and applied. Where appropriate, diagrams are included and applied effectively. Where appropriate, examples are used effectively. There are no significant errors. ..... 9-10