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bandicam 2020-02-29 18-31-07-354

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Now we move on to question 2.2c first Again, similar with question 2.2b We use simultaneous equations and we can find the intersection point between the two equations D1 and S0. We can find that P1 equals to 50 dollars and Q1 equals to 60 units. Now, we can move on to question 2.2d. So, in this question, similar with question 2.2b and c, we also use simultaneous equations and then we can find the intersection point between the two equations D0 and S2 And then we can find that P2 equals to 50 dollars and Q2 equals to 20 units. Now, here's another question 2.2e about the above two cases 2.2c and d. So let us recall what we have learnt in the class about the changes in equilibrium first. We have learnt that if demand increases while supply remains unchanged, the equilibrium price and quantity will increase together. And vice versa, if demand decreases while supply remains unchanged, the equilibrium price and quantity will decrease together. It means that when demand changes while supply keeps unchanged the equilibrium price and quantity will change in the same direction. However, if it is the case when demand keeps unchanged while supply changes, the equilibrium price and quantity will not change in the same direction. Now we move back to the case of question 2.2c. We can find the relationship between D0 and D1 that D0 shifts right and will become D1. It means that demand increases and we can find that the intersection point between S0 and D1 should be higher and towards right. What does it mean? It means that the equilibrium price and quantity increases together. It is consistent with what we have learnt in the class. And it is, if demand increases while supply remains unchanged, the equilibrium price and quantity will increase together. So, the equilibrium price and quantity are changing in the same direction, right? Then we can move on to the case of question 2.2d. Now the supply curve changes while demand curve keeps unchanged. S0 shifts left and will become S2. And it means that supply decreases and we can find that the intersection point between S2 and D0 should be higher and towards left. What does it mean? It means that the equilibrium price increases but quantity decreases. It is also consistent with what we have learnt in the class. The equilibrium price and quantity will not change in the same direction. Finally, let's move on to the final question 2.2f. So, in this question, I have to define what a price ceiling is first. The government requires that the market price must not rise above a certain level and an effective price ceiling must be set below the equilibrium market price. As a result, it will create an excess demand (or shortage) in the market. Therefore, in question 2.2f, if the price ceiling is set at 60 dollars, which is higher than the equilibrium market price, it is not an effective ceiling as excess supply will occur. So you can see from this graph, the quantity supplied is higher than the quantity demanded. So this is called excess supply. However, if the ceiling is set at 30 dollars, which is lower than the equilibrium market price, it is an effective ceiling since excess demand will occur. When ceiling meets D0 at (60,30), quantity demanded will be equal to 60. And when ceiling meets S0 at (20,30), quantity supplied will be equal to 20. And it means shortage occurs and the excess demand should be 60-20=40. This is the end of our presentation and thank you for all of your listening and participation. If you have any questions enquired, please type in the chat box.

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Duration: 7 minutes and 42 seconds
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Language: English
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Posted by: stupidfung on Feb 29, 2020

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