A flatter demand curve is more elastic — a small price change causes a large change in quantity demanded. A steeper curve is more inelastic — quantity barely responds to price changes.
Step 2 of 6
Consumer & Producer Surplus
Consumer surplus (CS) is the triangle below demand and above the equilibrium price. Producer surplus (PS) is the triangle above supply and below the equilibrium price. Together they equal total surplus.
Step 3 of 6
Deadweight Loss
When quantity is pushed away from the equilibrium quantity (by a tax, ceiling, or floor), the shaded triangle of surplus is lost entirely — it goes to no one. This is deadweight loss.
Step 4 of 6
Binding Price Ceiling
A price ceiling set below equilibrium is binding — at that low price, quantity demanded (Qd) exceeds quantity supplied (Qs), creating a persistent shortage.
Step 5 of 6
Binding Price Floor
A price floor set above equilibrium is binding — at that high price, quantity supplied (Qs) exceeds quantity demanded (Qd), creating a persistent surplus.
Step 6 of 6
An Excise Tax
An excise tax shifts supply up by the tax amount, creating a wedge between the price buyers pay and the price sellers receive. Quantity falls below the efficient level, and the tax burden is split based on relative elasticity.
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How to use the visual review
Spend 30 seconds per step before clicking next. Look at the diagram, then ask yourself: "Could I sketch this from memory and label every part?"
Use the dots below the diagram to jump straight to any step, or the arrow keys to move forward and back.
This is great for review the night before the exam — fast, visual, and covers every core diagram you need to remember from Unit 2.