What happens if price falls below the market clearing price?

Quantity demanded increases, quantity supplied decreases, and price rises.

Suppose the government raises the price of cheese above the market equilibrium level
(P 0) by imposing a high minimum price and purchasing all of the excess supply from the
market, and these quantities are destroyed. Based on the areas in the figure below, what
is the change in consumer surplus after this policy is adopted?

Consumers lose area A+B

Refer to Figure 9.1. If the market is in equilibrium, the producer surplus earned by the
seller of the 1st unit is ________.

$20.00

Refer to Figure 9.2. At price 0H and quantity Q1, producer surplus is the area

AHB
Scenario 2.1:
The demand for books is: Qd = 120 - P
The supply of books is: Qs = 5P

Refer to Scenario 2.1. What is the equilibrium price of books?

20

Imagine the market for Good X has a demand function of QDX = 40 – PX and a supply
function of QSX = 2PX – 20. Suppose the current price of Good X (PX) is 30.
Calculate consumer surplus (CS).

50

Imagine the market for tea has a demand function of QDX = 10 – 2PX and a supply function
of QSX = PX − 2, where PX is the price of the tea. Assuming the price is at equilibrium,
calculate the equilibrium price (P*).

MacGuffins have a demand function of QD = 70 – P and a supply function of QS = 2P + 10.

Determine the price at equilibrium

20

Imagine the market for Good X has a demand function of QDX = 100 – 2PX – 4PY + .05M +
0.1AX, and a supply function of QSX = 4PX – 10, where PX is the price of Good X, PY is the
price of Good Y, M is the average consumer income and AX is the amount spent to
advertise Good X.
If PY is $3, M is $24,000, AX is $500, find the equilibrium price of Good X.

224.6667