Suppose the market for Blu-rays has the demand and supply ...

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Suppose the market for Blu-rays has the demand and supply schedules shown in the table above. What is the equilibrium price and the equilibrium quantity in this market? Suppose the current price is 12.00.
 
  What is the quantity of Blu-rays sold? Explain. Is there a shortage or a surplus? How big is it? Explain.

Question 2

Suppose bad weather decreases the wheat harvest by 12 percent. If the price elasticity of demand for wheat is 0.6, how would the crop failure affect the price of wheat? Would the crop failure benefit or harm wheat farmers?
 
  What will be an ideal response?

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Answer to Question 1

The equilibrium price is 11.50. The equilibrium quantity is 30 million disks per month. The quantity sold is 20 million disks per month. Although at 12.00 suppliers want to sell 45 million disks, the buyers want to buy only 20 million and so 25 million disks won't be sold. Since the quantity supplied, 45 million disks, is greater than the quantity demanded, 20 million, there is a surplus, 25 million disks.

Answer to Question 2

When the price elasticity of demand is 0.6, a 12 percent decrease in quantity brings about a 20 percent increase in the price. Wheat farmers' total revenue increases because the demand is inelastic. So, taken as a group, wheat farmers' total revenue increases. However, the benefit is distributed unequally. Those farmers whose crop was destroyed because of the bad weather are harmed, whereas those farmers whose crop was spared the bad weather benefited.

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