# Project #9252 - HW2

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Be brief and clear

Question 1

Key Idea: Market adjustment will eliminate shortages and surpluses.

1.​Define the following terms:

​a.​Surplus

​b.​Shortage

​c.​Equilibrium price

​d.​Equilibrium quantity

2.​State what will happen to price when there is asurplus

3.​State what will happen to price when there is ashortage

Question 2

Key Idea: Sometimes the government does not allow price to be a rationing device.

1. Define the following terms:

a.​Price ceiling :The maximum allowable price to charge the seller of the product or service. Is usually set price ceilings in accordance with the law and the reduction of the pricing system seller to ensure fair trade practices and reasonable.

b.​Price floor : Minimum acceptable as limited by the dominant parties. Floors can be established for a number of factors, including prices, wages, interest rates, and underwriting standards and bonds.

2.​Describe the situations where price ceilings and price floors have no effects.

3.​List the undesirable effects of price ceilings.

4.​List the undesirable effects of price floors.

Question 3

Key Idea: Economists often distinguish the absolute, or money, price of a good from the relative price of a good.

1.​Explain how the price of a good can rise at the same time that it becomes relatively cheaper.

Question 4

Formula for Price Elasticity of Demand can be written as;

On Tuesday, price and quantity demanded are \$7 and 120 units, respectively. Ten days later, price and quantity demanded are \$6 and 150 units, respectively. What is the price elasticity of demand between the price of \$7 and the price of \$6?

Question 5

Key Idea: Price elasticity of demand is the percentage change in the quantity demanded as a result of percentage change in price of the good

What does a price elasticity of demand of 0.39 mean?

 Subject Business Due By (Pacific Time) 07/17/2013 02:30 pm
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