Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
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
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
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

Quantitative Analysis of Price Ceilings and Price Floors: Finding Areas

Microeconomics

5. Consumer and Producer Surplus; Price Ceilings and Floors

Quantitative Analysis of Price Ceilings and Price 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: QD = 600 - 100(2) and QS = -150 + 150(2).

Calculate the shortage created by the price ceiling by finding the difference between the quantity demanded and the quantity supplied at the price ceiling: Shortage = QD - QS.

Calculate the deadweight loss, which is the loss in total surplus due to the price ceiling. This is the area of the triangle formed by the shortage and the difference between the equilibrium quantity and the quantity supplied at the price ceiling. Use the formula for the area of a triangle: (1/2) * base * height, where the base is the shortage and the height is the difference in price between the equilibrium price and the price ceiling.