Equilibrium, shortages, surpluses and price ceilings and floors
Grade 12 Social Studies Worksheet
Circle the best answer.
Read this first
Lakeside apartments (example figures, made up for practice)
Rent Wanted before Wanted after 120 more households Offered $800 620 740 380 $900 560 680 440 $1,000 500 620 500 $1,100 440 560 560 $1,200 380 500 620 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 stays at 120, because the cap is the same $900 and the cap fixes the size of the gap.
- Rented apartments rise to 680, since 680 households now want one at the $900 rent under the cap.
- The shortage doubles from 120 to 240, while 440 apartments are rented at the $900 cap.
- Rent rises to $1,100 and 560 apartments are rented, as the market adjusts to the new households.
Suppose there were no cap. What would Pia expect the 120 extra households to do to rent and rented apartments?
- Rent would rise to $1,200 and 500 apartments would be rented, as the new households push it up.
- Rent would rise to $1,100 and 680 apartments would be rented, since 680 households want one.
- Rent would stay at $1,000 and 620 apartments would be rented, as landlords adjust the supply.
- Rent would rise to $1,100 and 560 would be rented, 120 more than under the cap.
Card
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?
- Better off: rent is lower, and rent is the main cost that a renter faces when finding a home.
- Unchanged: the lower rent and the slower repairs cancel out exactly when counted in dollars.
- Mixed: renters who find a unit pay less, but waits, slow repairs and conversions are added costs.
- 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?
- Quantity rises from 300 to 400 while the price stays $100, because the shifts offset on price.
- The quantity stays at 300, because a rise in demand is cancelled out by a rise in supply here.
- The price falls to $80 and quantity to 340, because the supply rise is the bigger shift.
- The price rises to $120 and quantity to 360, because the demand 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 4.
- 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.
- Not here: supply also rose by 100 at every price, so the price held at $100 and only quantity rose.
- 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 60 million bushels at $5, and the other 40 million they grew go to waste.
- Farmers sell 100 million and buyers take the whole amount, as demand adjusts to the higher price.
- Farmers sell 100 million at $5: buyers take 60 million and the government buys 40 million.
- Farmers sell 80 million bushels, the market amount, since the floor does not change what farmers grow.
Luz totals who gains and who pays under the $5 floor. Which summary fits the table?
- Farm revenue rises by $180 million and no one else loses, since the government buys the surplus.
- 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.
The same floor applied to both markets. Economists debate how large such effects are in real towns. Ren reads the table for a report on wage floors. Which claim does the table support best?
- The same $2 floor cost 200 jobs at the counters and 20 in cleaning, so job effects differ.
- Fast-food workers lost out as a group at $11, since 200 jobs at the counters disappeared.
- A $2 wage floor costs jobs in proportion to the wage rise, so both markets lost the same share.
- Hospital cleaners lost nothing at $11, because just 20 jobs disappeared, too few to count as a loss.
Card
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.
- The cap worked: tickets sold at $50 to the 1,000 people who got them, so the shortage ended.
- Buyers value seats at about $120; the cap held the face price at $50 but did not end the shortage.
In which seasons does Esme find that the $900 cap binds?
- In each of the three seasons, since a legal cap applies in the same way to each season of the year.
- In summer ($1,150) and spring ($950), where market rent exceeds $900; winter's $850 is unaffected.
- In summer alone, the season with the highest rent, since the cap binds the most extreme price.
- In winter, since $850 is the lowest rent of the three and the cap is meant to protect the lowest.