Equilibrium, shortages, surpluses and price ceilings and floors
Grade 12 Social Studies Worksheet
Circle the best answer.
A city caps rent at $900. Economists debate how large such effects are in real cities. The cap is $900. Milo compares the market before and after 120 more households arrive. What follows?
- The shortage doubles from 120 to 240, while 440 apartments are rented at the $900 cap.
- The shortage stays at 120, because the cap is the same $900 and the cap fixes the size of the gap.
- Rent rises to $1,100 and 560 apartments are rented, as the market adjusts to the new households.
- Rented apartments rise to 680, since 680 households now want one at the $900 rent under the cap.
Read this first
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a survey three years after the cap (made up for practice). Waiting lists for Lakeside apartments average 14 months. The share of landlords who make repairs within a week fell from 80% to 55%. Two of every ten owners turned rentals into condos. Economists debate how large such effects are in real cities.
A columnist says the cap left renters better off. Ari weighs the claim. What is the best verdict?
- Mixed: renters who find a unit pay less, but waits, slow repairs and conversions are added costs.
- Unchanged: the lower rent and the slower repairs cancel out exactly when counted in dollars.
- Better off: rent is lower, and rent is the main cost that a renter faces when finding a home.
- Worse off: a rent cap raises the total cost of housing for each renter in a city that tries one.
Demand and supply for used bikes both rose in spring. Bo uses the table. What happens to price and quantity?
- The price rises to $120 and quantity to 360, because the demand rise is the bigger shift.
- The quantity stays at 300, because a rise in demand is cancelled out by a rise in supply here.
- Quantity rises from 300 to 400 while the price stays $100, because the shifts offset on price.
- The price falls to $80 and quantity to 340, because the supply rise is the bigger shift.
A reporter writes that bike demand jumped 100 at every price, so prices must have jumped. How does Jun reply?
Use the picture in question 3.
- Not here: supply also rose by 100 at every price, so the price held at $100 and only quantity rose.
- Not here: supply rose by 160 at every price, which is why the price fell to $80.
- Right: the reporter needs just the demand column, since used-bike sellers cannot change their supply.
- Right: demand rose, and a rise in demand raises the price in any market, whatever supply does.
A farm crop with a price floor (example figures, made up for practice)
Price per bushel Million bushels demanded Million bushels supplied $3 100 60 $4 80 80 $5 60 100 $6 40 120 A floor of $5 is set, and the government buys every unsold bushel at $5.
At the $5 floor, what does Kira expect for the farmers, the buyers and the government?
- Farmers sell 80 million bushels, the market amount, since the floor does not change what farmers grow.
- Farmers sell 60 million bushels at $5, and the other 40 million they grew go to waste.
- Farmers sell 100 million at $5: buyers take 60 million and the government buys 40 million.
- Farmers sell 100 million and buyers take the whole amount, as demand adjusts to the higher price.
Luz totals who gains and who pays under the $5 floor. Which summary fits the table?
- Farm revenue rises from $320 million to $500 million, the whole amount paid by buyers at $5.
- Farm revenue rises from $320 million to $500 million; taxpayers pay $200 million.
- Farm revenue stays at $320 million, because the government pays just for the surplus bushels.
- Farm revenue rises by $180 million and no one else loses, since the government buys the surplus.
Use this
Juice stands and a tax (example figures, made up for practice). Columns: Price, Quantity demanded, Quantity supplied. $2, 140, 60; $3, 120, 80; $4, 100, 100; $5, 80, 120; $6, 60, 140. A tax of $2 per unit is collected from sellers. Buyers pay the price in the table; sellers keep that price minus the tax.
A $2 per-unit tax is collected from sellers. What does Noah predict for price and quantity?
- Buyers pay $4, sellers keep $2, and 100 are sold, since sellers absorb the whole tax.
- Buyers pay $5, sellers keep $3, and 80 are sold: the tax splits evenly and quantity falls.
- The price stays $4 and 100 are sold, because a tax on sellers cannot change what buyers pay.
- Buyers pay $6, sellers keep $4, and 60 are sold, since the whole tax passes to buyers.
Tala asks why buyers cannot keep paying $4 after the tax. What does the table show?
- At $4 sellers keep $2 and offer 100, while buyers want 60, so a surplus of 40 pushes the price down.
- At $4 the tax of $2 is half the price, so buyers cut their purchases in half to 50.
- At $4 sellers keep $2 and offer 60, while buyers want 100, so a shortage of 40 lifts the price.
- At $4 buyers want 100 and sellers offer 100, so $4 stays the price and just the tax is new.
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a charity concert (made up for practice). A city caps tickets for the concert at $50. The hall has 1,000 seats, and 3,000 people want a ticket at $50. A resale site shows tickets selling at $120.
What does the resale price tell Zee about the cap?
- Buyers value seats at $50; the resale price comes from sellers who ask too much, not from demand.
- The cap removed 2,000 seats from the market, which is why the resale price is higher.
- Buyers value seats at about $120; the cap held the face price at $50 but did not end the shortage.
- The cap worked: tickets sold at $50 to the 1,000 people who got them, so the shortage ended.
In which seasons does Esme find that the $900 cap binds?
- In summer alone, the season with the highest rent, since the cap binds the most extreme price.
- In summer ($1,150) and spring ($950), where market rent exceeds $900; winter's $850 is unaffected.
- In each of the three seasons, since a legal cap applies in the same way to each season of the year.
- In winter, since $850 is the lowest rent of the three and the cap is meant to protect the lowest.