Practice question on Supply & Demand + real world case study

Click on this link to read an interesting article on VAT in the UAE. Questions for discussion:

How would thus effect prices in the UAE. (Hint, draw a diagram to show this).

Now answer the following MCQ question:

The table below shows the demand & supply schedule for shortbread biscuits. You may use the last column to show your workings.

Price per packet	Quantity of packets demanded per month (000’s)	Quantity of packets supplied per month (000’s)	New quantity supplied per month (000’s)
$2.00	200	160
$2.10	180	180
$2.20	160	200
$2.30	140	220

A a result of the increase in baking costs for packaging shortbread biscuits (due to BREXIT and the falling pound increasing import costs), supply has fallen by 40,000 units at all price levels. As a result, the new equilibrium price is:

A) $2.00
B) $2.10
C) $2.20
D) 2.30

Answer:

Explanation: