ECON 1B03 Chapter 6: Micro Chapter 6 Solution.doc

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

If the price ceiling of per ticket is below the equilibrium price, then quantity demanded exceeds quantity supplied, so there will be a shortage of tickets. The policy decreases the number of people who attend classical music concerts, since the quantity supplied is lower because of the lower price. The imposition of a binding price floor in the cheese market is shown in figure 3. In the absence of the price floor, the price would be p1 and the quantity would be q1. With the floor set at pf, which is greater than p1, the quantity demanded is q2, while quantity supplied is q3, so there is a surplus of cheese in the amount q3 q2. b. c. The farmers" complaint that their total revenue has declined is correct if demand is elastic. With elastic demand, the percentage decline in quantity would exceed the percentage rise in price, so total revenue would decline.