## PlotIT - Build a demand and supply diagram

The demand and supply schedules for organically grown wheat are shown in the following table. From it we can see that at a price of £200, farmers will produce (or plan to plant and produce) 220 tonnes per annum (p.a.); likewise consumers will buy 220 tonnes p.a. at this price. However, the price of non-organic wheat falls dramatically and is considerably cheaper than organic wheat. As a result the demand for organically grown wheat changes by 80 tonnes at all prices. Calculate the new level of demand at each price level. Jot this down on a piece of paper. You may like to check your answer.

 Price per tonne (£) Tonnes supplied p.a. Tonnes demanded p.a. New tonnes demanded p.a 50 100 150 200 250 300 350 100 140 180 220 260 300 340 400 320 260 220 180 140 120

In the diagram below plot the original supply and demand curves and the new demand curve given this change in the price of non-organic wheat.

You may like to check your answer to see if it matches the correct demand and supply curves.

1

##### Market for organic wheat

What will be the shortage/surplus at the original price of £200 per tonne?

 a) A surplus of 80 tonnes b) A shortage of 80 tonnes c) A shortage of 50 tonnes d) A surplus of 50 tonnes Please select an answerYes, that's correct (i.e. 220 tonnes supplied minus 140 tonnes demanded).No, that's not right. 220 tonnes will be supplied and 140 tonnes will be demanded. This gives a surplus of 80 tonnes, not a shortage.No, that's not right. 220 tonnes will be supplied and 140 tonnes will be demanded. This gives a surplus of 80 tonnes.No, that's not right. 220 tonnes will be supplied and 140 tonnes will be demanded. This gives a surplus of 80 tonnes.

2

##### Equilibrium

What will be the new equilibrium price and quantity?

The new equilibrium price will be £150 per tonne and the quantity demand and supplied will be 180 tonnes p.a. (where the supply curve and the new demand curve intersect).