Chapter 3: Q.34 (page 78)
What is the relationship between total surplus and economic efficiency?
Economic efficiency and total surplus have a positive relationship. A maximum total or social surplus will exist in an economically efficient economy. Economic efficiency and overall surplus in society are inextricably linked.
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Table 3.8 shows the information on the demand and supply for bicycles, where the quantities of bicycles are measured in thousands.
a. What is the quantity demanded and the quantity supplied at a price of \(210?
b. At what price is the quantity supplied equal to 48,000?
c. Graph the demand and supply curve for bicycles. How can you determine the equilibrium price and quantity from the graph? How can you determine the equilibrium price and quantity from the table? What are the equilibrium price and equilibrium quantity?
d. If the price was \)120, what would the quantities demanded and supplied be? Would a shortage or surplus exist? If so, how large would the shortage or surplus be?
What does a downward-sloping demand curvemean about how buyers in a market will react to a higher
price?
What is producer surplus? How is it illustrated on a demand and supply diagram?
Name some factors that can cause a shift in the
supply curve in markets for goods and services.
How can you locate the equilibrium point on a demand and supply graph?
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