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Differentiate between a shortage and a surplus.
Shortage: Qd > Qs, price below equilibrium. Surplus: Qs > Qd, price above equilibrium.
Compare and contrast consumer surplus and producer surplus.
Consumer surplus: benefit to buyers. Producer surplus: benefit to sellers. Both maximized at equilibrium.
What are the differences between a price floor and a price ceiling?
Price floor: minimum price, creates surplus if above equilibrium. Price ceiling: maximum price, creates shortage if below equilibrium.
Compare the effects of a shift in demand versus a shift in supply on equilibrium price and quantity.
Demand shift: price and quantity move in the same direction. Supply shift: price and quantity move in opposite directions.
Differentiate between single and double shifts in supply and demand.
Single shift: one curve moves, predictable outcome. Double shift: both curves move, one variable is indeterminate.
Compare the impact of a price floor and a price ceiling on consumer surplus.
Price floor: typically reduces consumer surplus. Price ceiling: typically increases consumer surplus, but creates shortages.
Compare the impact of a price floor and a price ceiling on producer surplus.
Price floor: typically increases producer surplus, but creates surpluses. Price ceiling: typically reduces producer surplus.
Compare the effect of a tax and a subsidy on market equilibrium.
Tax: decreases quantity, increases price for buyers, decreases price for sellers. Subsidy: increases quantity, decreases price for buyers, increases price for sellers.
What are the differences between elastic and inelastic demand in the context of market disequilibrium?
Elastic demand: quantity demanded changes significantly with price changes, exacerbating shortages or surpluses. Inelastic demand: quantity demanded changes little with price changes, mitigating shortages or surpluses.
Compare the short-run and long-run effects of a price ceiling on the housing market.
Short-run: small shortage, existing landlords stay. Long-run: larger shortage, fewer new apartments built, existing apartments deteriorate.
Analyze a graph showing a shortage.
Price is below equilibrium; Qd > Qs; area represents unmet demand.
Analyze a graph showing a surplus.
Price is above equilibrium; Qs > Qd; area represents excess supply.
Analyze a graph showing an increase in demand.
Demand curve shifts right; equilibrium price and quantity increase.
Analyze a graph showing a decrease in demand.
Demand curve shifts left; equilibrium price and quantity decrease.
Analyze a graph showing an increase in supply.
Supply curve shifts right; equilibrium price decreases, quantity increases.
Analyze a graph showing a decrease in supply.
Supply curve shifts left; equilibrium price increases, quantity decreases.
Identify consumer surplus on a supply and demand graph.
Area above the equilibrium price and below the demand curve.
Identify producer surplus on a supply and demand graph.
Area below the equilibrium price and above the supply curve.
Identify deadweight loss on a graph with a price floor.
The triangle representing lost surplus due to reduced quantity traded.
Identify deadweight loss on a graph with a price ceiling.
The triangle representing lost surplus due to reduced quantity traded.
How does a shortage apply to concert tickets?
High demand, limited tickets available, driving up prices or creating unmet demand.
How does a surplus apply to unsold goods in a store?
Too much stock, not enough demand, leading to clearance sales to reduce inventory.
How does increased demand affect equilibrium price and quantity for a new popular product?
Both equilibrium price and quantity increase due to higher consumer interest.
How does decreased demand affect equilibrium price and quantity for a fading fad?
Both equilibrium price and quantity decrease as consumer interest wanes.
How does increased supply affect equilibrium price and quantity due to new technology?
Equilibrium price decreases, and quantity increases because production becomes cheaper.
How does decreased supply affect equilibrium price and quantity after a natural disaster?
Equilibrium price increases, and quantity decreases due to disrupted production.
How does consumer surplus relate to getting a bargain?
It's the 'bargain' feeling; the difference between what you're willing to pay and what you actually pay.
How does producer surplus relate to profit?
It's the profit they make; selling for more than they're willing to.
How does a price floor on agricultural products affect the market?
It creates a surplus because the price is set above the equilibrium, leading to more supply than demand.
How does a price ceiling on rent affect the housing market?
It creates a shortage because the price is set below the equilibrium, leading to more demand than supply.