Econ Problem Set 2.2

Topics: Supply and demand, Economic equilibrium, Partial equilibrium Pages: 1 (332 words) Published: April 14, 2013
Problem set 2.2
This question Is mainly concentration on the price changed effect. As the price raise ,what is the changed to the quantity, turnover ,and the market equilibrium. And the assumption are as following: The demand of the concert remain unchanged, the supply of the concert also unchanged( which consist on 3 concerts) ,so the supply curve is vertical. In the question, the concert price in 2005 is $500 and all the tickets have been sold out which are 12000seats. The turnover is 12000seats. But in 2006, the price of concert raise to $600,and the 2000 tickets unsold. It means the turnover is only10000 seats. In the analysis part, compare with the ticket sold situation in 2006 ,in 2005 there are no excess supply ,as all tickets sold out. In 2006 it appears excess supply, The reason of this is because the price raise, although the demand have not change ,the quantity demand is affecting by the price raise. According the law of demand, when the price raise ,the quantity demand is decreased. In this case, the price increase,and the quantity demand decrease. It lead the supply more than demand in the price level $600. The excess supply appear. So when we consider the price in 2005 and the 2006,the demand unchanged ,and the supply unchanged ,the ticket in2005 which is $500 is the market equilibrium. As the demand and supply are the same ,and the price level is stable. But on the other side , if the price level in 2005 is suffering excess demand , the story will be different. When there is a excess demand in 2005, and the price level in 2006 is $600 suffering excess supply. There may not be a market equilibrium in 2005 because the price have tendency to change when there is a excess demand also there is a tendency to change in 2006 as there is a excess supply .Hence, the market equilibrium is between the price $500to$600.
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