Answer the given questions in a detailed manner.
Problem 1. Explain, in your own words, the difference between surplus, shortage and equilibrium. What characteristics does each of them possess?
Problem 2. In the case of shortage, how does the market return to equilibrium?
Problem 3. In the case of surplus, how does the market return to equilibrium?
(For 2-3 above, do not simply state what happens, but also EXPLAIN why it happens.)
Problem 4. Describe what happens to the price and quantity when each of the following occur:
a. demand increases
b. supply increases
c. supply decreases
d. demand decreases
Problem 5. What do the determinants of supply and demand have to do with your answer for # 4 above?
Problem 6. Consider # 4 again, what would happen to the p and q if we
a. combined # 4 a-b?
b. What would happen to p and q if we combined 4 c-d?
for 6a-b, Be sure to explain "the why" as well as "the what"