Question: Suppose the graph below represents the demand and supply for cotton wool at various prices, answer the question that follow: Price (AUD) Cam 6

Suppose the graph below represents the demand and supply for cotton wool at various prices, answer the question that follow: Price (AUD) Cam 6 5 4 3 2 1 DD 10 20 30 40 50 60 70 80 90 Cotton wool (Kg) (a) Fill out the table below to indicate surplus and shortage Price per Ke Demand (DD) 123456 BRAASE 89 70 55 39 25 11 Supply Surplus (+) (SS) Shortage (-) 40 80 (b) What is the market equilibrium price and quantity for cotton wool? (c) Cotton wool is a key supply item in health services. To improve health services, assume that the government passes a price control legislation by fixing the price of cotton wool at AUD 2. Explain the economic implications of this action in the cotton wool market.

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