basics

1. LECTURE (6)
The Equilibrium Price & Quantity
Price ceiling
Price floor
By
Dr. Mohamed Osman
Lecturer of public economics-faculty
of commerce Alexandria university

2. Effects of shifts in
Demand & Supply
on the
Market Equilibrium.
( Continue )

3. Change in both demand and supply
1- Increase in demand and supply:-

4. 2-Decrease in demand and supply:-

5. 3-Increase in demand and decrease in supply:-

6. 4-Decrease in demand and increase in supply:-

7. Q- Choice:-
1- Suppose that video game discs are a normal
good, if the income increases, you predict that in
the market for video games:-
a- Both equilibrium price and quantity will increase.
b-Both equilibrium price and quantity will decrease.
c-Equilibrium price will increase and equilibrium
quantity will decrease.
d-Equilibrium price will decrease and equilibrium
quantity will increase.

8. 2- DVDs and DVDs players are complements; an
increase in the price of DVDs players would
cause which of the following in the market for
DVDs:-
a-The equilibrium price of DVDs would decrease
and the equilibrium quantity would increase.
b-The equilibrium price of DVDs would increase and
the equilibrium quantity would decrease.
c-Both equilibrium price and quantity of DVDs
would increase.
d-Both equilibrium price and quantity of DVDs will
decrease.

9. 3- Which of the following will definitely occur
when there is an increase in demand equal
decrease in the supply of chocolate:-
a-An increase in equilibrium price and
equilibrium quantity is constant.
b-A decrease in equilibrium price and
equilibrium quantity is constant.
c- Both equilibrium price and quantity will
decrease.
d- Both equilibrium price and quantity will
increase.

10. 4- Which of the following will definitely occur
when there is an decrease in demand and
decrease in supply of tea:-
a-An increase in equilibrium price .
b-A decrease in equilibrium price .
c- An increase in equilibrium quantity.
d- A decrease in equilibrium quantity.

11. Demand & Supply Application

13. NOTE THAT
• The Government set price ceiling only for
necessary goods to help poor people.
• The government distributes this goods or
products by using Rationing system.
• An example of price ceiling is called “ rent
control “ which means that the government
sets a maximum rent for rental apartments
lower than equilibrium rent which creates a
shortage in the market.

14. THE black markets
It means that the sellers sell the available quantity of a certain
good at a price higher than the price ceiling set by the
government in order to increase their revenues

17. NOTE THAT
• Sometimes the government sets a price floor
in the labor market called “a minimum wage
law”. In this case the created surplus is called
“unemployment”
• At higher wages, the worker offer more work
hours , & the firm willing to hire less worker
(unemployment).

18. Q- True or false:-
1-Any point on or outside the PPF is attainable.
2-Microeconomics Is the study of economic
aggregates on the level of whole economy or
country
3- According to the law of demand, a price
decrease leads to an increase in demand.
4-Relative scarcity means resources are not
enough to satisfy all needs.

19. 5- Poor countries only face the problem of scarcity.
6- Poor countries find it easier than rich countries
to devote resources to the production of capital
goods which reduces the gap between poor and
rich countries over time.
7- Rich countries find it easier than poor countries
to devote resources to the production of capital
goods, making the economic growth faster in
rich countries which increases the gap between
poor & rich countries

20. 8-The economic growth shifts the PPF inward
9-a movement along the supply curve is caused
by changes in prices of factors of production.
10- An increase in price of coffee, will lead to a
decrease in demand of tea.
11- if the price of a good is 10$ at which buyers
want to purchase 8000 units & seller wish to
sell 10000 units, then the price will tend to
decrease.