Question

1.      Demand and Supply Model: Explain the relationship between Supply (S), Demand (D), quantity supplied (Q_s), quantity demanded (Q_d), equilibrium, disequilibrium (shortages and surpluses), price ceilings, price floors, and alternative markets.

Answer 1

Supply - schedule of quantities which a producer will sell over a range of prices

Demand - schedule of quantities which a consumer will buy over a range of prices

Quantity supplied - at a given price, what is the quantity a producer would want to sell

Quantity demanded - at a given price, what is the quantity a consumer would want to buy

Equilibrium - where demand and supply schedules intersect => quuantity demanded = quantity supplied

Disequilibrium -> if quantity demanded > quantity supplied => deficit; else it is a surplus

Price ceilings - price cannot go above a certain maximum price => meant to support consumers in market where there is deficit

Price floors - price cannot go below a certain minimum level => meant to support producers in a market where there is surplus

Alternative markets - Markets outside of established market. Example part-time farmers selling produce in local community.