Question

The demand for seats in 10 a.m. classes at the university is higher than the demand for seats in 8 a.m. classes. The supply is fixed. If the university prices classes at the price required to achieve equilibrium at 10 a.m., there will be
a. a shortage at 8 a.m.
b. a surplus at 8 a.m.
c. equilibrium at 8 a.m.
d. disequilibrium at 8 a.m., but we cannot determine which type.

Answer 1

Answer:

The correct answer is option b.

Explanation:

At a university, the demand for seats in 10 a.m. classes is higher than the demand for seats in 8 a.m. classes. The supply of seats is fixed.  

If the price of both the classes is fixed to achieve equilibrium at 10 a.m., there will be a surplus at 8 a.m. This happens because the demand for classes at 8 a.m is lower, so their equilibrium price should be lower as well.  

But since the price is fixed for 10 a.m, it is higher than their equilibrium. At the price level higher than the equilibrium, the quantity supplied will be more and the quantity demanded will be less because of the law of demand and supply. This will create a surplus at 8 a.m.

This is also shown in the given figure.