Question

This question examines the market for bananas. You will use the quantity demanded and the quantity supplied at different prices to identify the equilibrium price. Additionally, you will investigate the role of international trade when the world price is below the market equilibrium price and analyze the impact of a tariff.

Below, you are provided with the quantity of bananas demanded and supplied. This data is obtained from points on the demand and supply curves in the market for bananas.

Price
(dollars per pound) Quantity of Bananas Demanded
(pounds) Quantity of Bananas Supplied
(pounds)
$ 2 18 8
$ 4 15 10
$ 6 12 12
$ 8 9 14
$10 6 16

Assume that the market is not open to trade. What is the equilibrium price of a pound of bananas? At this price, what is the quantity of bananas demanded and what is the quantity of bananas supplied?

Answer 1

The equilibrium price for bananas in a market not open to international trade is $6 per pound, where the quantity demanded and supplied are both 12 pounds.

Step-by-step explanation:

To determine the equilibrium price of bananas in a market without international trade, we need to find the price at which the quantity demanded equals the quantity supplied. Looking at the data provided:

• At $2, the quantity demanded (18 pounds) is greater than the quantity supplied (8 pounds).
• At $4, the quantity demanded (15 pounds) is still greater than the quantity supplied (10 pounds).
• At $6, the quantity demanded (12 pounds) equals the quantity supplied (12 pounds), indicating the equilibrium.
• At higher prices, the quantity supplied exceeds the quantity demanded.

Therefore, the equilibrium price is $6 per pound, where both the quantity demanded and the quantity supplied are 12 pounds.