Supply & Demand unit test
A test on this unit alone, marked as a percentage and a letter grade — for the test your class is actually sitting, rather than for May. Answer everything, then submit once: seeing the answer to question 3 before attempting question 4 makes the final percentage meaningless.
Excise tax incidence
When indeterminate becomes determinate
Unit elastic demand
Necessity vs luxury
Producer surplus
Supply shifters
Deadweight loss
Complements
Law of supply
Elasticity along a linear demand curve
Sign matters for income and cross-price
Inferior good
Short answer 1. Define or explain: Consumer surplus
3 ptsShort answer 2. Define or explain: Shortage
3 ptsShort answer 3. Define or explain: The supply shifters
3 ptsShort answer 4. Define or explain: Perfectly inelastic demand
3 ptsFree response
7 ptsA city imposes a rent ceiling of $900 per month on apartments. The unregulated equilibrium rent was $1,300, with 50,000 apartments rented. At $900, landlords are willing to supply 38,000 apartments and tenants wish to rent 62,000. (a) Identify whether this is a binding price ceiling and calculate the resulting shortage. (b) Draw a correctly labeled graph of the apartment market showing the ceiling, and shade the deadweight loss. (c) Explain two consequences of the ceiling besides the shortage, and identify who gains and who loses relative to the unregulated market. (d) Explain how the size of the shortage would differ in the long run compared with the short run, and identify the elasticity concept your answer relies on.
Identify whether the ceiling binds and calculate the shortage.
Draw a labeled graph showing the ceiling and shade the deadweight loss.
Explain two consequences besides the shortage and identify winners and losers.
Explain how the shortage differs in the long run and name the elasticity concept involved.