Chapter 7, Problem 1FRQ

To determine

The question requires us to draw a correctly labeled graph representing the equilibrium in the market for tomatoes, and label a price that would lead to a shortage.

Explanation of Solution

The following graph represents the shortage of tomatoes in the market:

  

Here, point E represents the equilibrium point in the market where Pe is the equilibrium price, and Qe is the equilibrium quantity.

The line PcB represents the price at which the market is facing a shortage of tomatoes because at this price the quantity demanded (Qd) is more than the quantity supplied (Qs).

The quantity difference between points A and B represents the size of the shortage of tomatoes in the market.