Part 3: Diagram Problem (10 marks)
3
Using diagrams and short answers, answer the following questions:
a. Over what range of prices does a shortage arise?
b. What happens to the price when a shortage occurs?
c. Over what range of prices does a surplus arise?
d. What happens to the price when there is a surplus?
e. Explain why the equilibrium price is often called the market-clearing price.