Table 19. 5 illustrates the market's demand and supply for cheddar cheese. Graph the data and find the equilibrium. Next, create a table showing the change in quantity demanded or quantity supplied, and a graph of the new equilibrium, in each of the following situations:

a. The price of milk, a key input for cheese production, rises, so that the supply decreases by 80 pounds at every price.

b. A new study says that eating cheese is good for your health, so that demand increases by 20% at every price.

The demand schedule shows the quantity demanded of a product at different price levels. it can be represented graphically as a demand curve.

Similarly, the supply schedule shows the quantity supplied of a product at different price levels. It can be represented graphically as a supply curve.

Equilibrium is achieved at the point where the quantity demanded and quantity supplied are equal. Graphically it is the point of intersection of demand and supply curves. Here quantity demanded and quantity supplied are both 650 pounds when the price level is $3.4 per pound.

As the price of milk increases, the cost of production for cheese would also increase. This increase in cost would cause the supply to decrease by 80 pounds at each price level.

This would cause the supply curve to move to the left. The equilibrium price level would increase and equilibrium quantity would decrease. The equilibrium price would be $3.60 and the equilibrium quantity would be 620 pounds.

The new study would improve the consumer's preference regarding cheese. This would further cause the demand to increase by 20% at each price level.

The new table would be,

The demand curve would move to the right causing the equilibrium price and equilibrium quantity to increase. The new equilibrium quantity would be 720 pounds and the equilibrium price would be $3.80.