Download Equilibrium, Surplus, and Shortage

Equilibrium, Surplus, and Shortage
Suppose that in the market for gadgets, the quantities demanded and supplied and various prices are shown on the
following table.
Price
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
Quantity Demanded
450
400
350
300
250
200
150
100
Quantity Supplied
50
100
150
200
250
300
350
400
Use the information in the table to draw the supply and demand curves for the gadget market on the following grid.
Label the demand curve D1 and label the supply curve S1. Then use the graph to answer questions 1-8.
1. The equilibrium price in the gadget market is ______________.
2. At the equilibrium price, sellers want to sell _______ gadgets and buyers want to buy ________ gadgets.
3. If the price of gadgets raises to $0.70, sellers will want to sell________ gadgets and buyers will want to buy _______.
4. A price raise to $0.70 will result in a ________________ of (#)________ gadgets.
5. If that market condition exists, prices will eventually _______________, and settle at $________.
6. If the price of gadgets falls to $0.30, sellers will want to sell________ gadgets and buyers will want to buy ________.
7. A price fall to $0.30 will result in a ________________ of (#)________ gadgets.
8. If that market condition exists, prices will eventually _______________, and settle at $________.
Now assume that as a result of changing consumer preferences, gadgets become the newest fad and are very popular.
Use the new demand schedule below to draw a second demand curve on the grid above labeled D2.
Price
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
Quantity Demanded
550
500
450
400
350
300
250
200
9. The new equilibrium price in the gadget market is ________.
10. At the new price, sellers want to sell ______ gadgets and buyers want to buy
______ gadgets.
11. As a result of the change in consumer preferences, the price of a gadget
increased by _________, the quantity demanded increased _________ units, and
the quantity supplied increased _________ units.
12. So, when the market experiences a shortage or surplus, supply and demand
work together to influence price and move toward a new ____________________.
Practice with Price Controls
Rent control is a type of price ceiling. It is an effort by city and municipal governments to help those living in poverty
by making housing more affordable. Using the data table provided, create a graph that shows apartments rents in a local
housing market, placing P on the x-axis and Q on the y-axis. Then, use the graph to answer the questions below.
1. The equilibrium price of apartments in this market is ________________
2. The equilibrium quantity of apartments in this market is ________________.
Now suppose this local government imposes rent control and requires that apartments be rented for no more than $600
a month. Draw a horizontal line across the graph at the $600 rental price to show this price ceiling.
3. At a rent of $600, ____________
Price
QS
QD
$400
100 900
apartments are demanded and __________
$500
200 800
apartments are supplied.
$600
300 700
4. The local government intended to help those
$700
400 600
in poverty by controlling housing price but
$800
500 500
$900
600 400
instead, created a __________________ of
$1000
700 300
___________ apartments.
$1100 800 200
5. What happens to many people as a result of
$1200 900 100
this rent control?
(in thousands)
__________________________________________________
__________________________________________________
6. How could the local government achieve its goal of helping those in
need without using rent control?
__________________________________________________________________________________________
A minimum wage is a type of price floor. It is an effort by city and municipal governments to ensure that workers
receive a fair wage for their labor. Using the data table provided, create a graph that shows wages in a local labor
market, placing P on the x-axis and Q on the y-axis. Then, use the graph to answer the questions below.
7. The equilibrium price of labor in this market is ________________
8. The equilibrium quantity of labor in this market is ________________.
Now suppose this local government imposes a minimum wage of $10 an hour – no worker can receive a wage less than
that. Draw a horizontal line across the graph at the $10 wage to show this price floor.
9. At a wage of $10, ____________
Price
QS
QD
$3
100 900
workers are demanded and __________
$4
200 800
workers are supplied.
$5
300 700
10. The local government intended to help those
$6
400 600
in poverty by setting a minimum wage but,
$7
500 500
$8
600 400
instead, created a __________________ of
$9
700 300
___________ workers.
$10
800 200
11. What happens to many workers as a result of
$11
900 100
this minimum wage?
(in thousands)
__________________________________________________
__________________________________________________
12. How could the local government achieve its goal of helping workers
without using a minimum wage?
____________________________________________________________________________________________