Principles of Microeconomics-I Exam Paper

Price controls are government-imposed limits on the prices that can be charged for goods and services. A price ceiling is a maximum price set by the government, leading to shortages and inefficient allocation of resources. A price floor is a minimum price set by the government, leading to surpluses and potential waste of resources.

Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. Producer surplus is the difference between the price received by producers and the minimum price they are willing to accept. A decrease in equilibrium price due to a shift in the supply curve decreases both consumer and producer surplus.

Demand elasticity measures how much quantity demanded responds to a change in price, while supply elasticity measures how much quantity supplied responds to a change in price.

<p>Consumer surplus is the benefit consumers receive when they are able to purchase a good or service at a price lower than the maximum price they are willing to pay. Producer surplus is the benefit producers receive when they are able to sell a good or service at a price higher than the minimum price they are willing to accept.</p> Signup and view all the answers

<p>A decrease in equilibrium price due to a shift in the supply curve reduces both consumer and producer surplus, as the lower price decreases the benefit to consumers and producers. This can be illustrated on a supply and demand diagram showing the changes in consumer and producer surplus.</p> Signup and view all the answers