Name Date Period -Econ Unit 2: Chapter 4-7- Demand, Supply, Prices and Markets

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1 / 88 Packet /20 Notes Unit 2 BIG PICTURE Questions /12 Name Date Period -Econ Unit 2: Chapter 4-7- Demand, Supply, Prices and Markets /108 Total Packet What is BIG PICTURE for Unit 2? To find the answer, we, as economists, must start by quickly summarizing the Unit 2 three essential questions (EQ 1 point each): 1. Who creates demand and what causes demand for a good/service to change (shift)? 2. Explain how demand reacts to a change in price... In other words, how far will your dollar s t r e t c h? 3. Who creates supply and what causes supply for a good/service to change (shift)? 4. How do demand and supply work with each other to make the consumer and producer happy? 5. Explain how markets structure themselves and how this leads to fulfilling our wants and needs? Summarize what the BIG PICTURE is for Unit 2 (7 points): Unit 2 Objectives: Identify the difference between monetary and nonmonetary incentives and how changes in incentives cause changes in behavior (H-SS ) Understand the relationship of the concept of incentives to the law of supply and the relationship of the concept of incentives and substitutes to the law of demand (H-SS ) Discuss the effects of changes in supply/demand on the relative scarcity, price, and quantity of particular products (H-SS Discuss the economic principles that guide the location of agricultural production and industry and the spatial distribution of transportation and retail facilities (H-SS ) Describe the effect of price controls on buyers and sellers (H-SS ) Understand the process by which competition among buyers and sellers determines a market price (H-SS ) Analyze how domestic and international competition in a market economy affects goods and services produced and the quality, quantity and price of those products. H-SS

2 Unit 2 Preview Questions /8 Think of a product you recently purchased. Record the name of the product and the approximate price you paid, and then answer the following questions. Product Price 1. What are some reasons you were willing to buy the product at this price? 2. What are some reasons the seller was willing to sell the product as this price? 3. Do you think you paid the right price for this product? Why or why not? 4. Explain how you would feel if this product was regulated (price, quality, who could buy was all controlled) in the following ways: Highly: Moderately: Not at all: Chapter 4 Vocabulary Chart -Demand /7 Substitution Effect Income Effect Normal Good Inferior Good Complement Substitute Elasticity of Demand Chapter 4 Questions /10 1. List and describe the five determinates (shifters) of demand: 2. Why do economists use percentage change to calculate elasticity of demand?

3 3. What is demand elasticity and what are three determinates (causes of) of demand elasticity? Chapter 5 Vocabulary Chart -Supply /7 Marginal Costs Marginal Revenue Elasticity of Supply Subsidy Regulation Excise Tax Variable Costs Chapter 5 Questions /9 1. How does a subsidy effect supply? What is the point of the subsidy? 2. Name and describe the six determinates (shifters) of supply: 3. What circumstances cause a firm to experience diminishing marginal returns? 4. How can the global economy affect the supply of a good in the United States?

4 Chapter 6 Vocabulary Chart -Prices /6 Supply Shock Rationing Black Market Spillover Costs Price Ceiling Price Floor Chapter 6 Questions /3 1. What factors can lead to a market disequilibrium? 2. What role does the government play in determining some prices? 3. How do prices act as a language in the free market? Chapter 7 Vocabulary Chart -Market Structures /12 Barrier to Entry Economies of Scale Perfect Competition Monopolistic Competition Differentiation Oligopoly Collusion

5 Cartel Monopoly Natural Monopoly Government Monopoly Deregulation Chapter 7 Questions /14 1. Describe four characteristics and give four examples of Monopolistic Competition (free market) within Tehachapi. 2. Why must perfectly competitive markets always deal in commodities? 3. Critical Thinking: Other than technology and start-up costs, what are two specific examples of barriers that could prevent a company or individual from entering a market? 4. What can a firm with market power do? 5. What are three different types of price discrimination? Explain how they could possibly hurt the marketplace. 6. Critical Thinking: Do you believe that public education is a natural monopoly? Explain your response with economic terminology. 7. How do economists determine whether a market is an oligopoly? 8. How would price fixing and collusion help producers? 9. Critical Thinking: why does the government believe it has the right to intervene in markets to promote competition? Is this consistent with the idea of laissez-faire and free markets?

6 Closure and Review: The Shifting Curve (This part of the packet is not graded) 1. Use our PowerPoint notes to graph your classes demand/supply curves for water Quantity Demanded of Bottled Water Price Quantity Supplied of Bottled Water $5 $4 $3 $2 $1 2. What is equilibrium quantity? 3. What is equilibrium price? 4. What market condition would exist if price was set at $? Explain how this would effect the market for bottled water. 5. What market condition would exist if price was set at $? Explain how this would affect the market for bottled water. 6. Explain how Supply/Demand is directly connected to: a. The concept of scarcity. b. The concept of opportunity cost. c. The concept of thinking at the margin.

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