Alright, so we've got an example here. Consider the following graph. A price ceiling of $20 would cause a surplus of 500 units, a shortage of 500 units, surplus of 1,000, shortage of 1,000 or no effect, alright. So we have to remember with price ceilings, they set a price too low if they're effective, right? And when the price is too low, the demand is going to outweigh the supply, so we're going to be in a situation where there's a shortage if there's this price ceiling if it's effective, right? So off the bat we can cancel these that say surplus. We know it's not going to be any of those answers, but even if we can't do that, remember that specific knowledge on the test, we do have the graph and let's go ahead and look at the graph and see if we can figure out, the surplus or the shortage or what effect we have here. So the first thing we want to check is is this an effective price ceiling? And my trick remember is the house trick. So notice that at this price of $20 we do get a house, right? We get the house, so we can say that it is an effective price ceiling because we got the house there, so we know that it's going to affect the market and it's going to do something here. So let's see what happens here. The government says you can't charge a price more than 20 the market wants to trade at 25, so this is going to be effective. So what do we have here? This is going to be the supply curve, right? Because we have our downward demand, double d's, supply is the other one. Right? So what happens here at the price of $20, 500 is going to be our quantity supplied, right? That's where the $20 touches the supply curve and a 1,000 over here that's going to be the quantity demanded, right, that's where the $20 is touching the demand curve. So what do you have? We have a quantity supplied of 500, a quantity demanded of 1,000. There's a shortage, right? People want 1,000, but there's only 500 available. So that difference there between the 500 and 1,000 is the shortage. Right? So the shortage isn't a thousand. There's not a thousand shortage. There's still 500 units available. It's the other 500 that are missing that's the shortage. So the quantity demanded being a thousand minus the quantity supplied of 500. If we subtract those, we're going to get 500 which is the shortage. So we have a shortage of 500 units in this case. Alright? So let's go ahead and go to the next video.
Table of contents
- 0. Basic Principles of Economics1h 5m
- Introduction to Economics3m
- People Are Rational2m
- People Respond to Incentives1m
- Scarcity and Choice2m
- Marginal Analysis9m
- Allocative Efficiency, Productive Efficiency, and Equality7m
- Positive and Normative Analysis7m
- Microeconomics vs. Macroeconomics2m
- Factors of Production5m
- Circular Flow Diagram5m
- Graphing Review10m
- Percentage and Decimal Review4m
- Fractions Review2m
- 1. Reading and Understanding Graphs59m
- 2. Introductory Economic Models1h 10m
- 3. The Market Forces of Supply and Demand2h 26m
- Competitive Markets10m
- The Demand Curve13m
- Shifts in the Demand Curve24m
- Movement Along a Demand Curve5m
- The Supply Curve9m
- Shifts in the Supply Curve22m
- Movement Along a Supply Curve3m
- Market Equilibrium8m
- Using the Supply and Demand Curves to Find Equilibrium3m
- Effects of Surplus3m
- Effects of Shortage2m
- Supply and Demand: Quantitative Analysis40m
- 4. Elasticity2h 16m
- Percentage Change and Price Elasticity of Demand10m
- Elasticity and the Midpoint Method20m
- Price Elasticity of Demand on a Graph11m
- Determinants of Price Elasticity of Demand6m
- Total Revenue Test13m
- Total Revenue Along a Linear Demand Curve14m
- Income Elasticity of Demand23m
- Cross-Price Elasticity of Demand11m
- Price Elasticity of Supply12m
- Price Elasticity of Supply on a Graph3m
- Elasticity Summary9m
- 5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
- Consumer Surplus and Willingness to Pay38m
- Producer Surplus and Willingness to Sell26m
- Economic Surplus and Efficiency18m
- Quantitative Analysis of Consumer and Producer Surplus at Equilibrium28m
- Price Ceilings, Price Floors, and Black Markets38m
- Quantitative Analysis of Price Ceilings and Price Floors: Finding Points20m
- Quantitative Analysis of Price Ceilings and Price Floors: Finding Areas54m
- 6. Introduction to Taxes and Subsidies1h 46m
- 7. Externalities1h 12m
- 8. The Types of Goods1h 13m
- 9. International Trade1h 16m
- 10. The Costs of Production2h 35m
- 11. Perfect Competition2h 23m
- Introduction to the Four Market Models2m
- Characteristics of Perfect Competition6m
- Revenue in Perfect Competition14m
- Perfect Competition Profit on the Graph20m
- Short Run Shutdown Decision33m
- Long Run Entry and Exit Decision18m
- Individual Supply Curve in the Short Run and Long Run6m
- Market Supply Curve in the Short Run and Long Run9m
- Long Run Equilibrium12m
- Perfect Competition and Efficiency15m
- Four Market Model Summary: Perfect Competition5m
- 12. Monopoly2h 13m
- Characteristics of Monopoly21m
- Monopoly Revenue12m
- Monopoly Profit on the Graph16m
- Monopoly Efficiency and Deadweight Loss20m
- Price Discrimination22m
- Antitrust Laws and Government Regulation of Monopolies11m
- Mergers and the Herfindahl-Hirschman Index (HHI)17m
- Four Firm Concentration Ratio6m
- Four Market Model Summary: Monopoly4m
- 13. Monopolistic Competition1h 9m
- 14. Oligopoly1h 26m
- 15. Markets for the Factors of Production1h 33m
- The Production Function and Marginal Revenue Product16m
- Demand for Labor in Perfect Competition7m
- Shifts in Labor Demand13m
- Supply of Labor in Perfect Competition7m
- Shifts in Labor Supply5m
- Differences in Wages6m
- Discrimination6m
- Other Factors of Production: Land and Capital5m
- Unions6m
- Monopsony11m
- Bilateral Monopoly5m
- 16. Income Inequality and Poverty35m
- 17. Asymmetric Information, Voting, and Public Choice39m
- 18. Consumer Choice and Behavioral Economics1h 16m
5. Consumer and Producer Surplus; Price Ceilings and Floors
Price Ceilings, Price Floors, and Black Markets
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