Question

10. Market Equilibrium: a. where the supply curve meets the demand curve, and thus we get a Price (P*) where the Quantity demanded is exactly equal to the quantity demanded (Q* =Qs=Qd) b. When P is high compared to what should have been P*, we get Qs>Qd, resulting in excess supply or what is called a surplus (a bad thing!) c. When P is low compared to what should have been P*, we get Qs<Qd, resulting in excess demand or what is called a shortage (a bad thing!)
please label

Answer 1

b) Price floor - when P is high compared to what should have been P*, we get Qs greater than Qd resulting in excess supply. Price floor is a type of government intervention where prices are set above the equilibrium level. It is the minimum price that is being charged.

c) Price ceiling- When price is low compared to what should have been P*, we get Qs less than Qd, resulting in excess demand. It is also called maximum price. It is the government imposed price on how high the prices can be. It is set less than the equilibrium level resulting in shortage of supply.