Econ based off quiz 3
When the quantity demanded has increased at every price, it might be because
the price of a complementary good has decreased
If the demand for a product increases, then we would expect equilibrium price
and equilibrium quantity both to increase.
If the government removes a binding price ceiling from a market, then the price paid by buyers will
increase, and the quantity sold in the market will increase.
Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, the
quantity demanded of toothpaste decreases, and the quantity of toothpaste that firms want to supply increases.
When a certain price control is imposed on this market, the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P, dollars per unit for that quantity and sellers are willing and able to accept a minimum of P2
dollars per unit for that quantity. If P1 - P2 = $3, then the price control is
either a price ceiling of $3.00 or a price floor of $6.00.
Total revenue equals
price x quantity.