Question 1

How is the equilibrium price determined? What happens if the price is above the equilibrium price? What happens if the price is below the equilibrium price?

Accepted Answer

The answer of How is the equilibrium price determined? What...

Question 2

"A shortage is the same thing as scarcity." Do you agree or disagree with this statement? Why? What can cause a shortage to disappear in a market? What can cause scarcity to disappear?

Accepted Answer

The answer of "A shortage is the same thing as...

Question 3

A shortage creates a situation that forces prices to ________ while a surplus creates a situation that forces prices to ________.

Accepted Answer

A shortage in the market typically leads to higher prices as the demand exceeds the supply. Conversely, a surplus, where supply exceeds demand, tends to lead to lower prices as sellers try to offload excess inventory.

Question 4

Given a market equilibrium point, explain, using the concepts of demand and supply, how it is achieved.

Accepted Answer

The answer of Given a market equilibrium point, explain, using...

Question 5

The demand for orthodontists' services falls as the proportion of the population that obtains braces falls. It may take several years before the new long-run equilibrium for the orthodontic labor market is attained. In the meantime, the orthodontic labor market experiences a

Accepted Answer

The decrease in demand for orthodontists' services leads to a surplus of orthodontic labor in the market as there are more orthodontists than there are patients seeking their services. This surplus may take several years to be resolved as it may require some orthodontists to leave the market or for new entrants to reduce their supply. This surplus of labor may lead to decreased wages or reduced hours for orthodontists until a new long-run equilibrium is attained.

Question 6

If a scalper for the Super Bowl is able to charge $10,000 for a front-row seat, this suggests that

Accepted Answer

If a scalper is able to charge such a high price for a front-row seat, it suggests that the demand for Super Bowl tickets exceeds the supply at the regular price. In other words, there is a shortage of tickets. This indicates that the regular price is lower than the equilibrium price, and that there is an opportunity for the ticket seller to increase the price and capture some of the consumer surplus. The scalper's ability to charge such a high price does not necessarily make the football fan worse off, as they may still be willing to pay it if they highly value the experience of being at the Super Bowl. However, it does suggest that the regular price is too low and there may be room for the organizer to increase the price to better reflect the true market value of the tickets.

Question 7

Suppose a shortage for good X exists. Given this information, we know that

Accepted Answer

When there is a shortage of a good, it means that the quantity demanded exceeds the quantity supplied at the current price. This creates upward pressure on the price as consumers compete for the limited supply of the good. As the price increases, suppliers are incentivized to produce more of the good and bring it to market, which helps to alleviate the shortage. Thus, the price of the good will tend to rise toward the equilibrium level.

Question 8

At the market clearing price,

Accepted Answer

At the market clearing price, there is neither a shortage nor a surplus because quantity supplied equals quantity demanded, and this occurs when the supply and demand curves intersect. So, all of the above options are correct.

Quiz 3: Demand and Supply