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Chapter 3: Q. 8 (page 78)
Does a price ceiling change the equilibrium price?
No.
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Will supply curves have the same shape in all
markets? If not, how will they differ?
If the price is above the equilibrium level, would
you predict a surplus or a shortage? If the price is below
the equilibrium level, would you predict a surplus or a
shortage? Why?
Will demand curves have the same exact shape in
all markets? If not, how will they differ?
What does a downward-sloping demand curve mean about how buyers in a market will react to a higher price?
A low-income country decides to set a price ceiling on bread so it can make sure that bread is affordable to the poor. Table 3.11 provides the conditions of demand and supply. What are the equilibrium price and equilibrium quantity before the price ceiling? What will be the excess demand or the shortage (that is, quantity demanded minus quantity supplied) be if the price ceiling is set at ? At ? At ?
| Price | Qd | Qs |
|---|---|---|
| \)1.60 | 9,000 | 5,000 |
| \(2.00 | 8,500 | 5,500 |
| \)2.40 | 8,000 | 6,400 |
| \(2.80 | 7,500 | 7,500 |
| \)3.20 | 7,000 | 9,000 |
| \(3.60 | 6,500 | 11,000 |
| \)4.00 | 6,000 | 15,000 |
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