Supply and Demand Equilibrium Short Essay and Excel Chart

Consider the following information on the supply and demand of widgets.

Price (P):

$40

$35

$30

$25

$20

$15

$10

$5

$0

Quantity Demanded (QD):

0

5

10

15

20

25

30

35

40

Quantity Supplied (QS):

36

32

28

24

20

16

8

4

0

Using Excel Charts, set up a diagram showing the supply curve, the demand curve, the equilibrium price, and quantity. In your diagram, please make sure that you put the quantity on the horizontal axis in your diagram. (You should create your diagram in Excel and then cut and paste it into the single Word file or pdf that you submit).

In the context of the diagram that you created in part A, write a short essay outlining and explaining the concept of market equilibrium. As part of your answer make sure that you explain why, and in what sense, an equilibrium will exist in markets with clearly defined supply and demand curves.

Finally explain what will happen to the amount actually traded in this market (i) if the government steps in and puts in place a maximum legal price (a.k.a. a price ceiling) that forces the market participants to trade at a price that is lower than the equilibrium price, and (ii) if the government steps in and puts in place a minimum legal price (a.k.a. a price floor) that forces the market participants to trade at a price that is higher than the equilibrium price in this market.