1. Explain why price falls when a surplus occurs.

2. Look at the prices listed in Exhibit 6-1. At what

prices does a surplus occur? What are the equi-

librium price and the equilibrium quantity?

3. "All markets are necessarily in equilibrium at all

points in time." Agree or disagree? Explain.

4. What might we see when a market is experienc-

ing a shortage? (Comment: It is not enough to

say that quantity demanded is greater than

quantity supplied because this answer is simply

a definition of shortage. You must identify a

tangible event of a shortage.)

5. Pens sell for about the same price in every city

in the country, but houses do not. Why?

6. Alfred Marshall, the British economist, com-

pared supply and demand to the two blades of a

pair of scissors. Explain his thinking.