Learning objectives
Determine equilibrium price and quantity from demand and supply, and explain how shortages and surpluses are eliminated by price adjustment
Analyse the effects of shifts in demand and/or supply on equilibrium price and quantity, including simultaneous shifts
Explain the signalling, incentive and rationing functions of price in allocating scarce resources
Illustrate consumer surplus, producer surplus and community surplus on a diagram and explain why competitive equilibrium is allocatively efficient (marginal benefit equals marginal cost)
(HL) Calculate consumer and producer surplus from the prices and quantities shown on a demand and supply diagram
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