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Worked-example setupScope and assumptions
- The $50 ceiling and $70 floor are hypothetical teaching policies applied to the fictional Linden baseline market; no real law or policy advice is involved.
- The baseline equilibrium is $60 and 800 chairs per week; both schedules remain fixed when the controlled prices are evaluated.
- Completed exchange is bounded by the short-side quantity, but allocation, queues, search, side terms, quality, enforcement, production, and inventory are not modeled.
- Period
- One representative fictional week
- Units
- USD per qualifying chair and qualifying chairs per week
- Rounding
- Exact whole-dollar prices and whole-chair model quantities
Test bindingness first
Linden's baseline equilibrium is $60 per chair. A $50 maximum is below that benchmark and binds in the model. A $70 minimum is above it and also binds. A ceiling above $60 or a floor below $60 would not constrain the baseline price.
Compute the two imbalances
| Hypothetical rule | Qd | Qs | Short side | Imbalance |
|---|---|---|---|---|
| $50 ceiling | 900 | 700 | 700 traded | 200 shortage |
| $70 floor | 700 | 900 | 700 traded | 200 surplus |
At the ceiling, not all 900 units desired can be traded because only 700 are offered. At the floor, not all 900 units offered can be traded because buyers would purchase 700.
Do not infer incidence from the displayed price
Some buyers can obtain a chair at $50; others may queue, search, pay side fees, accept lower quality, or go without. Some sellers can receive $70; others may sell nothing, carry output, reduce production, or exit. Allocation and enforcement determine who occupies those groups.
The model quantities also do not determine orders, revenue, inventory, losses, or cash. Those require seller-level transaction and accounting evidence. The example establishes bindingness and two quantity gaps—not universal buyer or seller benefit.
Verified calculation · economics foundations analysis
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- linear markets
- 1 field
Inspect data
{
"linden_controls": {
"demand_intercept_quantity": 1400,
"demand_quantity_per_price": 10,
"price_checks": {
"ceiling_50": 50,
"equilibrium_60": 60,
"floor_70": 70
},
"supply_intercept_quantity": 200,
"supply_quantity_per_price": 10
}
}Recomputed result
| Measure | Value |
|---|---|
| ceiling 50 below equilibrium | 1 |
| ceiling 50 quantity demanded | 900 |
| ceiling 50 quantity supplied | 700 |
| ceiling 50 short side traded quantity | 700 |
| ceiling 50 shortage quantity | 200 |
| equilibrium price | 60 |
| floor 70 above equilibrium | 1 |
| floor 70 quantity demanded | 700 |
| floor 70 quantity supplied | 900 |
| floor 70 short side traded quantity | 700 |
| floor 70 surplus quantity | 200 |