Table of contents

1. Introduction to Macroeconomics1h 57m
2. Introductory Economic Models59m
3. Supply and Demand3h 43m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Price Floors3h 40m
6. Introduction to Taxes1h 25m
7. Externalities1h 3m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. Introducing Economic Concepts49m
11. Gross Domestic Product (GDP) and Consumer Price Index (CPI)1h 37m
12. Unemployment and Inflation1h 15m
13. Productivity and Economic Growth1h 17m
14. The Financial System1h 37m
15. Income and Consumption52m
16. Deriving the Aggregate Expenditures Model1h 22m
17. Aggregate Demand and Aggregate Supply Analysis1h 18m
18. The Monetary System1h 1m
19. Monetary Policy1h 32m
20. Fiscal Policy1h 0m
21. Revisiting Inflation, Unemployment, and Policy46m
22. Balance of Payments30m
23. Exchange Rates1h 16m
24. Macroeconomic Schools of Thought40m
25. Dynamic AD/AS Model35m
26. Special Topics11m

5. Consumer and Producer Surplus; Price Ceilings and Price Floors

Quantitative Analysis of Price Ceilings and Floors: Finding Areas

Macroeconomics

5. Consumer and Producer Surplus; Price Ceilings and Price Floors

Quantitative Analysis of Price Ceilings and Floors: Finding Areas

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Multiple Choice

The supply and demand curves for a product are as follows. What is deadweight loss if a price ceiling of $2 is set?
Q_D = 600 – 100P
Q_S = -150 + 150P

150

187.5

212.5

300

375

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Verified step by step guidance

Identify the equilibrium price and quantity by setting the quantity demanded (QD) equal to the quantity supplied (QS). Solve the equation 600 - 100P = -150 + 150P to find the equilibrium price (P*).

Substitute the equilibrium price (P*) back into either the demand or supply equation to find the equilibrium quantity (Q*).

Determine the quantity demanded (QD) and quantity supplied (QS) at the price ceiling of $2 by substituting P = 2 into the demand and supply equations.

Calculate the shortage created by the price ceiling by finding the difference between the quantity demanded and the quantity supplied at the price ceiling.

Calculate the deadweight loss by finding the area of the triangle formed by the price ceiling, the equilibrium price, and the quantities at the price ceiling. Use the formula for the area of a triangle: (1/2) * base * height, where the base is the difference in quantities and the height is the difference in prices.