Principles of Economics: Market Equilibrium, Housing Market, Elasticity of Price, Wimbledon Ticket

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PRINCIPLE OF ECONOMICS

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Contents
Question 2..................................................................................................................................3
Question 3..................................................................................................................................8
Question 4................................................................................................................................14
Question 5................................................................................................................................18
Reference..................................................................................................................................21

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Question 2
(a)
Figure 1: The market equilibrium
(Source: Goodwin et al. 2019)
(b)

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Figure 2: the imposition of price floor
(Source: Goodwin et al. 2019)
The Pf shows the price floor above the equilibrium price and due to that the quantity has
reduced from Q1 to Qc.
(c)

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Figure 3: the sales tax
(Source: Goodwin et al. 2019)
Per unit sales tax that would have reduced the same amount of consumption is shown by the
red line.
(d)

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Figure 4: the comparison of dead weight loss
(Source: Goodwin et al. 2019)
The dead weight loss in case of per unit sales tax is lower than that of price floor as can be
compared by the two triangles in the two figures.
(e)