Compute the surplus a price ceiling destroys and the surplus it merely moves
Three steps, the way the exam actually works: work through the lab, write down your own measurements, then answer a 6-point free response. What you recorded goes to the grader with your writing, so a conclusion that does not follow from your own numbers will cost you the point — exactly as it would with a real reader.
Predict before you look
- When a price ceiling binds, quantity demanded exceeds quantity supplied. Which of the two determines how much is actually traded?
- Consumer surplus is the area between the demand curve and the price paid. What shape is that region when the traded quantity is limited by supply rather than by demand?
Nothing to submit here — these are to think through, so the prediction below is an informed one rather than a guess.
Commit to an answer now. It is not graded and being wrong costs nothing — the point is to have something specific to reconcile against once you have the data.
Answer every prediction to unlock the lab. A sentence is enough.
Run the investigation
Predictions first
The procedure and the simulation unlock once you have committed above. Observing before predicting is how a wrong intuition survives a lab intact.
Record what you measured
These are your numbers, not ours. The grader sees them, so your conclusions have to follow from what you actually recorded.
| Equilibrium price at reset | |
|---|---|
| Equilibrium quantity at reset | |
| Consumer surplus reported at reset | |
| Producer surplus reported at reset | |
| Quantity demanded at the $45 ceiling | |
| Quantity supplied at the $45 ceiling | |
| Shortage reported at the $45 ceiling |
Answer the free response
The lab reports surplus areas for the unconstrained equilibrium. (a) Verify the reported consumer and producer surplus at the equilibrium by computing each as a triangle area. Show your work, and state the total surplus. (b) With the ceiling at $45, only the quantity supplied is actually traded. Compute consumer surplus and producer surplus at the ceiling, and the new total surplus. Show your work. (c) Calculate the deadweight loss two ways — as the fall in total surplus, and as the area of the triangle between the traded quantity and the equilibrium quantity — and confirm the two agree. (d) The surplus figures in the lab panel do not change when you impose the ceiling. Explain what those figures are actually reporting, and explain why relying on them for part (b) would have given a wrong answer.
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