1-in a market diagram, a rise in the price of a substitute shifts equilibrium point  ? A-southwest B-southeast C-northeast D-northwest...

1-in a market diagram, a rise in the price of a substitute shifts equilibrium point  ?






2-in the market diagram, total sales revenue is measured by?

A-the length of a line 

B-the area of rectangle 

C-the area of triangle 

D- the area of two adjoining 


3-in the a market that was unobstructed, a persistent surplus is caused by an effective ?

A-price floor 

B-price celling 


4-if an effective price celling is removed, the amount of the good demanders would consume?

A-would certainly rise

B-would certainly fall

C-would certainly remain the same 

D-might rise, fall, or remain the same 


* Qd=3200-4p  Qs=200+4p

4- How much is consumer surplus at equilibrium?

5- How much is GT at equilibrium?

6- How much is the bullet area loss of GT if output is restricted by a price celling to one-half of equilibrium output?

Asked on by cl3ssic

1 Answer

justaguide's profile pic

justaguide | College Teacher | (Level 2) Distinguished Educator

Posted on

The market diagram of a product is a graphical way of representing the price of the product as a function of the quantity demanded. In the graph, points on the y-axis represent the price and the quantity demanded is represented by points on the x-axis.

For any product, if the price of a substitute product rises, people are less likely to consume the substitute and this results in an increase in demand of the product. On the market diagram this results in the equilibrium point shifting in the north-east direction.

The sales revenue is the product of the price and the quantity of the product sold. The demand curve can be extended to meet the x and y axes at points representing the highest demand and no demand. The sales revenue is the area of the triangle created by the axes and the demand curve.

A constant surplus is the result of a price floor being put into place. In this case, the quantity demanded does not meet the supply as customers are unwilling to pay more than the lowest price that has been set.

If an effective price ceiling is removed, suppliers are allowed to raise the price of the product, this leads to a fall in the number demanded as the demand curve for normal products is a downward sloping line.

The demand is given by the equation Qd = 3200 - 4p and the supply is given by Qs = 200 + 4p. At the point of equilibrium, the quantity supplied and that demanded at the particular price is equal.

3200 - 4p = 200 + 4p

8p = 3000

p = 375

At this price, the quantity is 1700.

There is no consumer surplus at the equilibrium point.