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Determining equilibrium price and quantity of lobsters

Suppose that the supply schedule of Maine lobsters is as follows:

Price of lobster Quantity of lobster supplied
(per pound) (pounds)
$25 800
20 700
15 600
10 500
5 400

Suppose that Maine lobsters can be sold only in the United States. The U.S. demand schedule for Maine lobsters is as follows:

Price of lobster Quantity of lobster supplied
(per pound) (pounds)
25 200
20 400
15 600
10 800
5 1000

a. Draw (on one graph) the demand curve and the supply curve for Maine lobsters

What are the equilibrium price and the equilibrium quantity of lobsters?

Now suppose that Maine lobsters can be sold in France. The French demand schedule for Maine lobsters is as follows:
Price of lobster Quantity of lobsters demanded
(per pound) (pounds)
25 100
29 300
15 500
10 700
5 900

b. What is the demand schedule for Maine lobsters now that French consumers can also buy them?

Price of lobster Quantity of lobsters (U.S. + French)
$25
20
15
10
5

Draw a supply and demand diagram that illustrates the new equilibrium price and quantity of lobsters.

What will happen to the price at which fishermen can sell lobster?

What will happen to the price paid by U.S. consumers?

What will happen to the quantity consumed by U.S. consumers?

Solution Preview

Please refer attached file for graphs.

Solution:

a. Draw (on one graph) the demand curve and the supply curve for Maine lobsters

Price of lobster Qty supplied Qty demanded
(per pound) (pounds) (pounds)
25 800 200
20 700 400
15 600 600
10 500 800
5 400 1000

What are the equilibrium price and the equilibrium quantity of lobsters?

Demand and supply curve intersects each other at Quantity =600 pounds and price=$15.
It means that at price of $15 per pounds, quantity demanded is equal to ...

Solution Summary

Solution describes the steps to determine equilibrium price and quantity of lobsters in U.S. It also discusses the effects on equilibrium price and quantity if lobsters can supplied in France also.

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