QQuestionEconomics
QuestionEconomics
"How do you find shortage or surplus on a graph?
A. Shortage is above the equilibrium price.
B. Surplus is below the equilibrium quantity.
C. Shortage is below the demand curve.
D. Surplus is the area above the supply curve."
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Answer
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Step 1:Let's solve this step by step:
Step 2:: Understanding Equilibrium
- In economics, equilibrium is the point where supply and demand curves intersect - At equilibrium, the quantity supplied equals the quantity demanded - The equilibrium price is where the supply and demand curves cross
Step 3:: Defining Shortage
- A shortage occurs when the quantity demanded exceeds the quantity supplied - On a graph, this means the quantity is BELOW the equilibrium quantity - Shortage appears as the horizontal distance between the quantity demanded and quantity supplied at a price ABOVE the equilibrium price
Step 4:: Defining Surplus
- A surplus occurs when the quantity supplied exceeds the quantity demanded - On a graph, this means the quantity is ABOVE the equilibrium quantity - Surplus appears as the horizontal distance between the quantity supplied and quantity demanded at a price BELOW the equilibrium price
Step 5:: Analyzing the Given Options
- Option A: Incorrect. Shortage is NOT above the equilibrium price - Option B: Incorrect. Surplus relates to quantity, not price - Option C: Incorrect. Shortage is not simply below the demand curve - Option D: Correct. Surplus is the area above the supply curve where quantity supplied exceeds quantity demanded
Final Answer
Surplus is the area above the supply curve.
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