Controls are not binding if the equilibrium price is within the price constraints: binding constraint = if equilibrium price is outside the constraint, new equilibrium is the price ceiling, binding constraints cause shortages of goods. Principle of voluntary exchange: q(p) = minimum [qd(p), qs(p): consumers buy only the quantity they wish to buy at the existing price. Non-price rationing = must ration the goods that there is a shortage of first come first serve . If equilibrium is above price floor unbinding: equilibrium below price floor - binding. New equilibrium in a binding constraint is the price floor: binding causes a surplus of goods. Minimum wage: if demand was perfectly inelastic then a min. wage raise would not reduce jobs. Tax incidence = how the tax burden is shared amongst the buyers and sellers. Depends on the forces of supply and demand. Tax collected by (levied on) seller buyer pays = market price, seller receives = market price - tax.
Assume the demand for sushi is Qd = 180 - 3P, where Qd is quantity demanded and P = price in dollars. The supply of sushi is Qs = 80 + 5P, where Qs is quantity supplied (and P is, again, price in dollars). A price of $20 would result in:
A.
Excess supply of 60
B.
Excess supply of 120
C.
Excess supply of 140
D.
Excess demand of 140
US agricultural price supports are politically popular because
A.
They have no adverse impacts
B.
The US would have food shortages without them
C.
The benefits accrue to a large number of voters and the costs are paid by a small number of voters
D.
The costs are spread out among millions of people
Assume the demand for sushi is Qd = 180 - 3P, where Qd is quantity demanded and P = price in dollars. The supply of sushi is Qs = 80 + 5P, where Qs is quantity supplied (and P is, again, price in dollars). What would be the equilibrium price?
A.
$15.50
B.
$12.50
C.
$10
D.
$15
Price floors and ceiling prices:
A.
cause the supply and demand curves to shift until equilibrium is established.
B.
both cause surpluses.
C.
interfere with the rationing function of prices.
D.
A change in the price of a good leads to a change in ________, which leads to a ___________
A.
quantity supplied; shift of the supply curve
B.
supply; shift of the supply curve
C.
quantity supplied; movement along the supply curve
D.
When the supply of a product increases, this implies that
A.
the price of the product first declined
B.
more will be purchased at the same price
C.
producers will be willing to accept a lower price for each unit sold
D.
demand for the good must have increased
E.
producers will offer less for sale at each possible price
If there is a excess demand for product X:
A.
fewer resources will be allocated to the production of this good.
B.
the price of the product will rise.
C.
the supply curve will shift to the left and the demand curve to the right, eliminating the shortage.
D.
the price of the product will decline.
Which of the following will occur when there is a simultaneous decrease in demand and a decrease in supply?
A.
B and D both necessarily occur
B.
An increase in equilibrium quantity
C.
A and C both necessarily occur
D.
An increase in price
E.
A and D both necessarily occur
F.
A decrease in price
G.
A decrease in equilibrium quantity
Velcro is becoming more and more popular for a variety of uses, including as fasteners for shoes. What should happen to the equilibrium price and quantity for shoelaces as a result?
A.
Both price and quantity should decrease.
B.
Price should increase and quantity decrease.
C.
Both price and quantity should increase.
D.
Price should decrease and quantity increase.
E.
Nothing.
If the government imposes a ceiling price on apartment rents, we would expect to observe all of the following except one. Which is the exception?
A.
conversion of some apartment complexes to condos
B.
a shortage
C.
an increase in the number of new apartment complexes being built
