The following figure illustrates the demand and supply curves for a good. Price (5) 888 60 40 0 5 10 20 30 Supply Demand Quantity (unit) Refer to the figure above. Which of the following is likely to happen if a price control of $80 is imposed in the market? O There will be a shortage of 25 units in the market. O There will be a surplus of 10 units in the market. O There will be a surplus of 25 units in the market. O There will be a shortage of 10 units in the market.

When a shortage of a good is present due to a price ceiling, the amount supplied will be greater than the amount demanded. the quality of the good will generally improve. O non-price factors, such as discrimination or waiting in line, will play a greater role in the allocation of the good. O the demand for the product will increase and, thereby, eliminate the shortage.

12 . Problems and Applications Q10 A market is described by the following supply and demand curves: QSQS  =  =  3P3P QDQD  =  =  400−P400−P   The equilibrium price is   and the equilibrium quantity is   .   Suppose the government imposes a price ceiling of $80. This price ceiling is    , and the market price will be   . The quantity supplied will be   , and the quantity demanded will be   . Therefore, a price ceiling of $80 will result in    .   Suppose the government imposes a price floor of $80. This price floor is    , and the market price will be   . The quantity supplied will be   and the quantity demanded will be   . Therefore, a price floor of $80 will result in    .   Instead of a price control, the government levies a tax on producers of $40. As a result, the new supply curve is: QSQS  =  =  3(P−40)3P−40   With this tax, the market price will be   , the quantity supplied will be   , and the quantity demanded will be   . The passage…

Refer to the table above. If demand increased by 4 units at each price , what would the new equilibrium price and quantity be?

The following graph displays four demand curves (LL, MM, NN, and OO) that intersect at point A. PRICE (Dollars per unit) 200 180 160 140 120 100 80 60 40 20 0 L 0 20 Statement 40 M N B cxx DE ++ x A + O 60 80 100 120 140 QUANTITY (Units) N M Between points A and D, curve NN is elastic. 160 180 200 Using the graph, complete the table that follows by indicating whether each statement is true or false. ? Between points A and B, curve LL is perfectly elastic. Curve NN is less elastic between points A and D than curve MM is between points A and C. True False O O O O O

(Ref: Demand for Apples) The following figure is the demand for apples. 3 2 F I A 1 1 B 1 C D 1 T 1 1 I OB OF+G OE+F+G B+E 1 + 2 E Demand for Apples F G 3 Reference: (Ref: Demand for Apples) 4 H I 10 6 1 7 D (Re Demand for Apples) Suppose you are considering lower the price from $3 to $2. If you do this, which areas on the graph represent the QUANTITY EFFECT? 8

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Price $2.00 $2.50 $3.00 $3.50 O surplus; increase surplus; decrease Quantity Demanded O shortage; increase O shortage; decrease 3,300 2,800 2,300 1,800 Quantity Supplied Using the table above, if the price is $2.50 the market is experiencing a pressure for the price to 300 800 1,300 1,800 and there is

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