# DEMAND AND SUPPLY. Chapter 3. Principles of Macroeconomics by OpenStax College is licensed under a Creative Commons Attribution 3.

Size: px
Start display at page:

Transcription

1 DEMAND AND SUPPLY Chapter 3 Principles of Macroeconomics by OpenStax College is licensed under a Creative Commons Attribution 3.0 Unported License

2 Demand for Goods and Services Demand refers to the amount of some good or service consumers are willing and able to purchase at each price. Demand is based on needs and wants (a consumer may differentiate between needs and wants. Economist consider they are the same thing. Demand is based on ability to pay (effective demand).

3 Demand for G&S Price is what buyers pay for a unit of the specific good or service Quantity demanded (Q d ) is the total number of units purchased at that price. A rise in its price almost always decreases their Q d and a fall in price will increase the Q d. Law of demand: inverse relationship between price and Q d, assuming that all other variables demand are held constant.

4 Demand Demand Schedule: A table that shows the quantity demanded at each price. Price is measured in dollars. The Q d is measured in specific units over some time period and over some geographic area. A demand curve shows the relationship between price and quantity demanded, with quantity on the horizontal axis and the price per gallon on the vertical axis.

5 Demand Curve for Gasoline A demand schedule shows that as P rises, Q d declines, and vice versa. These points are graphed. The line connecting them is the demand curve (D). The downward slope of D illustrates the law of demand.

6 Demand Curve P Qd \$ \$ \$ \$ \$ \$ \$

7 Demand is different from quantity demanded. Demand means the relationship between a range of prices and the quantities demanded at those prices, as illustrated by a demand curve or a demand schedule. Quantity demanded means only a certain point on the demand curve, or one quantity on the demand schedule. Demand refers to the curve and quantity demanded refers to a specific point on the curve.

8 Supply of Goods and Services Supply is the amount of some good or service a producer is willing to supply at each price. Price is what the producer receives for selling one unit of a good or service. A rise in price almost always leads to an increase in the quantity supplied of that good or service, while a fall in price will decrease the quantity supplied.

9 Supply Economists call this positive relationship between price and quantity supplied that a higher price leads to a higher quantity supplied and a lower price leads to a lower quantity supplied the law of supply. The law of supply assumes that all other variables that affect supply (non-price determinants) are held constant.

10 Supply A supply schedule is a table that shows the quantity supplied at a range of different prices. Price is measured in dollars and quantity demanded is measured as a certain amounts.

11 Supply Curve P Qs

12 Market Equilibrium Because the graphs for demand and supply curves both have price on the vertical axis and quantity on the horizontal axis, the demand curve and supply curve for a particular good or service can appear on the same graph. Together, demand and supply determine the price and the quantity that will be bought and sold in a market.

13 Demand and Supply for Gasoline The demand (D) and supply (S) curves intersect at the equilibrium point E (P=\$1.40 and Q = 600). The equilibrium is the only price where quantity demanded is equal to quantity supplied. At a price above equilibrium like \$1.80, quantity supplied exceeds the quantity demanded, so there is excess supply. At a price below equilibrium such as \$1.20, quantity demanded exceeds quantity supplied, so there is excess demand.

14 Market Equilibrium The equilibrium price is the only price where the plans of consumers and the plans of producers agree. The amount of the product consumers want to buy (quantity demanded) is equal to the amount producers want to sell (quantity supplied). This common quantity is called the equilibrium quantity. At any other price, when Qd does not equal Qs, the market is not in equilibrium at that price.

15 Equilibrium: Demand and Supply Intersect P Qd Qs

16 Surplus and Shortage If a market is at its P* and Q*, then it has no reason to move away from that point. However, if a market is not at equilibrium, then economic pressures arise to move the market toward the equilibrium price When P is above P* (Qs > Qd), we call this an excess supply or a surplus When P is below P* (Qs < Qd), there is excess demand, or a shortage

17 Shifts in Demand Non-Price factors affecting demand (ceteris paribus): a) Willingness to purchase (desire, tastes and preferences) b) Ability to purchase (income) c) Prices of related goods d) The size or composition of the population These factors matter both for individual and market demands.

18 Ceteris Paribus Assumption A demand curve or a supply curve is a relationship between two, and only two, variables: quantity on the horizontal axis and price on the vertical axis. The assumption behind a demand curve or a supply curve is that no relevant economic factors, other than the product s price, are changing. Ceteris paribus is a Latin phrase meaning other things being equal.

19 Demand and Income P D2 Do D1 16, , , , , ,

20 Income: Normal vs Inferior Goods A product whose demand rises when income rises, and vice versa, is called a normal good. A few exceptions to this pattern do exist. As incomes rise, the demand curve shifts to the right. A product whose demand falls when income rises, and vice versa, is called an inferior good. In other words, when income increases, the demand curve shifts to the left.

21 Other Determinants of Demand Changes in tastes or preferences Changes in the composition of the population Changes in the prices of related goods 1. Substitute goods 2. Complementary goods Changes in expectations about future price or other factors that affect demand

22 Shifts in Supply A supply curve shows how quantity supplied will change as the price rises and falls, assuming that no other economically relevant factors are changing (ceteris paribus). If other factors relevant to supply change, then the entire supply curve shifts. A shift in supply means a change in the quantity supplied at every price.

23 Cost of Production and Supply Profits = revenues - costs. G&S are produced combining inputs or factors of production. If a firm faces lower costs of production, while the prices remain unchanged, a firm s profits go up. It is more motivated to produce output, since the more it produces the more profit it will earn. So, when costs of production fall, a firm will tend to supply a larger quantity at any given price for its output.

24 Shift in Supply P S1 So S2 16, , , , ,

25 Determinants of Supply Changes in the cost of inputs (labor, raw materials, tools, machines, etc.) Changes in weather or other natural conditions Introduction of new technologies for production Government policies: taxes, regulations and subsidies

26 Changes in Equilibrium Step 1. Draw the initial demand and supply model. Consider the laws of demand and supply and the shifts for demand/supply. Find values for P* and Q*. Step 2. Decide whether the economic change being analyzed affects demand or supply. Step 3. Decide whether the effect on demand or supply causes the shift to the right or left, and sketch the new demand or supply curve on the diagram. Step 4. Identify the new equilibrium and then compare the original P* and Q* to the new equilibrium P and Q.

27 Shift in Supply with Fixed Demand

28 Change in Demand with Supply Fixed

29 Shifts vs Movements along a Demand or Supply Curve A shift in one curve never causes a shift in the other curve. Rather, a shift in one curve causes a movement along the second curve.

30 Real Market Adjustments In real world, many factors affecting D and S can change all at once. The D might increase due to rising incomes and population or decrease due to rising prices. The supply might increase due to new technologies or decrease as a result of government regulations, affecting many markets. The answer lies in the ceteris paribus assumption. Each economic event affects each market, one event at a time, holding all else constant (net effect).

31 Government intervention in Economy Sometimes governments intervene in well functioning markets Laws that government enacts to regulate prices are called price controls, which come in two flavors: a) A price ceiling keeps a price from rising above a certain level (the ceiling ) b) A price floor keeps a price from falling below a certain level (the floor )

32 Price Ceiling The original intersection of D and S occurs at E0. If D shifts from D0 to D1, the new equilibrium would be at E1 (unless a price ceiling prevents the price from rising). If the price is not permitted to rise, the Qs remains at 15,000. However, after the change in D, the Qd rises to 19,000, resulting in a shortage.

33 Price Floor The intersection of D and S would be at the equilibrium point E0. However, a price floor set at Pf holds the price above E0 and prevents it from falling. The result of the price floor is that Qs exceeds Qd. There is excess supply, also called a surplus.

34 Consumer, Producer, Social Surplus

35 Consumer, Producer, Social Surplus The amount that individuals would have been willing to pay, minus the amount that they actually paid, is called consumer surplus. The amount that a seller is paid for a good minus the seller s actual cost is called producer surplus. The sum of consumer surplus and producer surplus is social surplus, also referred to as economic surplus or total surplus.

36 Consumer, Producer, Social Surplus The imposition of a price floor or a price ceiling will prevent a market from adjusting to its equilibrium price and quantity, and thus will create an inefficient outcome. But there is an additional twist here. Along with creating inefficiency, price floors and ceilings will also transfer some consumer surplus to producers, or some producer surplus to consumers.

37 Consumer, Producer, Social Surplus Consumer surplus is the gap between the price that consumers are willing to pay, based on their preferences, and the market equilibrium price. Producer surplus is the gap between the price for which producers are willing to sell a product, based on their costs, and the market equilibrium price. Social surplus = consumer surplus + producer surplus. Total surplus is larger at Q* and P* than it will be at any other quantity and price. Deadweight loss is loss in total surplus that occurs when the economy produces at an inefficient quantity.

### This is what we call a demand schedule. It is a table that shows how much consumers are willing and able to purchase at various prices.

Demand Market: an institution or mechanism, which brings together buyers ("demanders") and sellers ("suppliers") of particular goods and services. The remainder of this unit assumes a perfectly competitive

### 23115 ECONOMICS FOR BUSINESS Lecture 1: Market forces of supply and demand

23115 ECONOMICS FOR BUSINESS Lecture 1: Market forces of supply and demand 1. INTRODUCTION THEORY OF SUPPLY AND DEMAND o Considers interactions between buyers and sellers in a competitive market. o In

### Individual & Market Demand and Supply

Mr Sydney Armstrong ECN 1100 Introduction to Microeconomic Lecture Note (3) Individual & Market Demand and Supply The tools of demand and supply can take us a far way in understanding both specific economic

### 1. Demand: willingness to buy a good or service and the ability to pay for it; how much of an item an individual is willing to purchase at each price

1. Demand: willingness to buy a good or service and the ability to pay for it; how much of an item an individual is willing to purchase at each price 2. The two things needed for demand to exist are: willingness

### Macro Unit 1b. This is what we call a demand schedule. It is a table that shows how much consumers are willing and able to purchase at various prices.

Macro Unit 1b Demand Market: an institution or mechanism, which brings together buyers ("demanders") and sellers ("suppliers") of particular goods and services. Notice that the remainder of this unit assumes

### Getting ready for the AP Macroeconomics Exam Lesson 2

Getting ready for the AP Macroeconomics Exam Lesson 2 Quantity S / D vs. Supply and Demand, Law of Supply and Demand, Reasons for Change of Supply and Demand How does a demand schedule differ from a market

### LEARNING UNIT 4 LEARNING UNIT 4

DATE: March 2014 MODULE: PMIC6111 TEXTBOOK REFERENCE: CHAPTER 7 pgs 109-132 THEME: DEMAND, SUPPLY AND PRICES OBJECTIVES: BY END OF YOU SHOULD KNOW THE FOLLOWING: CONSTRUCT AND INTERPRET GRAPHS EXPLAIN

### 1. Demand: willingness to buy a good or service and the ability to pay for it; how much of an item an individual is willing to purchase at each price

1. Demand: willingness to buy a good or service and the ability to pay for it; how much of an item an individual is willing to purchase at each price 2. Quantity demanded vs demand: quantity demanded is

### Markets. Markets. The Market Forces of Supply and Demand. The Market Forces of Supply and Demand. Competition: Perfect and Otherwise

The Market Forces of and Demand Chapter 4 All rights reserved. Copyright 21 by Harcourt, Inc. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department,

### 1. Explain 2. Describe 3. Create 4. Interpret

Law of Demand Section:- B Objectives 1. Explain the law of demand. 2. Describe how the substitution effect and the income effect influence decisions. 3. Create a demand schedule for an individual and a

### Chapter 4. Demand, Supply and Markets. These slides supplement the textbook, but should not replace reading the textbook

Chapter 4 Demand, Supply and Markets These slides supplement the textbook, but should not replace reading the textbook 1 What is a market? A group of buyers and sellers with the potential to trade 2 What

### Opportunity Costs when production is in quantity per/hr =

CHAPTER 1 THE CENTRAL IDEA 1.1 Scarcity and Choice for Individuals SCARCITY PRINCIPLE Scarcity principle (no free lunch principle): Although we have boundless needs and wants, the resources available to

### A.P. Microeconomics. In Class Review #1 Economic Principles & Systems

A.P. Microeconomics In Class Review #1 Economic Principles & Systems Micro vs. Macro Economics: study decisions and use of resources Micro: study decisions of small units (households & firms) Macro: study

### Basic Economics Chapter 4

1 Basic Economics Chapter 4 The Market Forces of Supply and Markets and Competition Market = a group of buyers and sellers of a particular good or service Buyers = determine the demand for the product

### Chapter 4: The Market Forces of Supply and Demand

Chapter 4: The Market Forces of Supply and Demand What factors affect buyers demand for goods? What factors affect sellers supply of goods? How do supply and demand determine the price of a good and the

### I. Decision Making Units

LECTURE NOTE 02 DEMAND, SUPPLY AND MARKET EQUILIBRIUM Outline of today s lecture: I. Decision Making Units... 1 II. Circular Flow... 2 III. Demand in Output Markets... 4 IV. Supply in Output Markets...

### Exam 01 - ECON Friday, October 1st

Name: Exam 01 - ECON 2301-05 - Friday, October 1st Figure 1 1. Refer to Figure 1. This economy has the ability to produce at which point(s)? a. A, B, D b. A, B c. C, F, G d. A, B, C, F, G 2. Any point

### David Kelly. Demand and Supply

Demand and Supply Individual Demand versus Market Demand Demand is the quantity of a good or service that consumers are willing and able to buy at a given price in a given time period. Individual demand

### Exam 01 - ECON Friday, October 1st

Name: ID: A Exam 01 - ECON 2301-05 - Friday, October 1st 1. Demand is said to be inelastic if the a. quantity demanded changes proportionately the same as price. b. quantity demanded changes proportionately

### Economics for Business. Lecture 1- The Market Forces of Supply and Demand

Economics for Business Lecture 1- The Market Forces of Supply and Demand The theory of supply and demand (S&D): Considers how buyers and sellers behave and interact with one another in competitive markets

### Chapter 4 DEMAND. Essential Question: How do we decide what to buy?

Chapter 4: Demand Section 1 Chapter 4 DEMAND Essential Question: How do we decide what to buy? Key Terms demand: the desire to own something and the ability to pay for it law of demand: consumers will

### DEMAND. Economics Unit 2 Just the Facts Handout

DEMAND Economics Unit 2 Just the Facts Handout What is Demand? A market is a place where people buy and sell things. A market has two sides. There is a buying side and a selling side. The buying side of

### 1.1 Competitive markets: Demand and supply

Learning Outcomes Outline the meaning of the term market. Explain the negative causal relationship between price and quantity. escribe the relationship between an individual consumer s demand and market

### Demand and Supply. Chapter 2 pages 18-24, 27-3-, 33-34

Demand and Supply Chapter 2 pages 18-24, 27-3-, 33-34 Markets Market- where buyers and sellers come together to carry out an economic transaction Markets can be physical places where goods/services are

### CH 4: Supply and Demand

CH 4: Supply and Demand Demand The law of demand states that the quantity of a good demanded is inversely related to the good s price In other words: Quantity demanded rises as price falls Quantity demanded

### 3 CHAPTER OUTLINE CASE FAIR OSTER PEARSON. Demand, Supply, and Market Equilibrium. Input Markets and Output Markets: The Circular Flow

CASE FAIR OSTER PEARSON PRINCIPLES OF MICROECONOMICS E L E V E N T H E D I T I O N Prepared by: Fernando Quijano w/shelly Tefft 2of 68 Demand, Supply, and Market Equilibrium 3 CHAPTER OUTLINE Firms and

### Part I: PPF, Opportunity Cost, Trading prices, Comparative and Absolute Advantage

Economics 101 Spring 2018 Homework #2 Due Thursday, February 22, 2018 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name, and section number on top

### Introduction/Notes to students 2. AS 90983: Demonstrate understanding of consumer choices, using scarcity and/or demand (1.1)

Contents Introduction/Notes to students 2 AS 90983: Demonstrate understanding of consumer choices, using scarcity and/or demand (1.1) 1 Basic concepts central ideas 3 2 Basic concepts the choices we make

### Demand/Supply Unit Essential Questions

Demand/Supply Unit Essential Questions -What is the role of demand in free market capitalism? -How do changes in price influence quantity demanded? -What factors affect changes in demand that influence

### ECONOMICS. Chapter 4 The Market Strikes Back

Lesson 1 ECONOMICS Chapter 4 The Market Strikes Back Review: Supply and Demand The previous lesson focused on demand and supply, we studied the demand curve and the supply curve P P S D Quantity Quantity

### CASE FAIR OSTER PRINCIPLES OF MICROECONOMICS E L E V E N T H E D I T I O N. PEARSON 2014 Pearson Education, Inc. Publishing as Prentice Hall

PRINCIPLES OF MICROECONOMICS E L E V E N T H E D I T I O N CASE FAIR OSTER PEARSON Prepared by: Fernando Quijano w/shelly Tefft 2 of 50 Demand, Supply, and Market Equilibrium 3 CHAPTER OUTLINE Firms and

### Policy Evaluation Tools. Willingness to Pay and Demand. Consumer Surplus (CS) Evaluating Gov t Policy - Econ of NA - RIT - Dr.

Policy Evaluation Tools Evaluating Gov t Policy - Econ of NA - RIT - Dr. Jeffrey Burnette In economics we like to measure the impact government policies have on the economy and separate winners and losers.

### CHAPTER 2: DEMAND AND SUPPLY

CHAPTER 2: DEMAND AND SUPPLY CIA4U Ms. Schirk 2.3 THE MARKET A market can be: A physical place where goods are bought and sold A collective reference to all the buyers and sellers of a particular good

### CHAPTER 2: DEMAND AND SUPPLY

2.3 THE MARKET CHAPTER 2: DEMAND AND SUPPLY CIA4U Ms. Schirk A market can be: A physical place where goods are bought and sold A collective reference to all the buyers and sellers of a particular good

### AP Microeconomics Chapter 3 Outline

I. Learning Objectives In this chapter students should learn: II. Markets III. Demand A. What demand is and how it can change. B. What supply is and how it can change. C. How supply and demand interact

### Demand, Supply, and Efficiency

OpenStax-CNX module: m48832 1 Demand, Supply, and Efficiency OpenStax College This work is produced by OpenStax-CNX and licensed under the Creative Commons Attribution License 4.0 (This appendix should

### Price = The Interaction of Supply and Demand WEDNESDAY, FEBRUARY 17 THURSDAY, FEBRUARY 18

Price = The Interaction of Supply and Demand WEDNESDAY, FEBRUARY 17 THURSDAY, FEBRUARY 18 Chapter 4: Section 1 Understanding Demand What Is Demand? Markets are where people come together to buy and sell

### CHAPTER THREE DEMAND AND SUPPLY

CHAPTER THREE DEMAND AND SUPPLY This chapter presents a brief review of demand and supply analysis. The materials covered in this chapter provide the essential background for most of the managerial economic

### Chapter 2. Supply and Demand

Chapter 2 Supply and Demand Reading Assignment for the Week: Finish Chapter 2 Chapter 3 2-2 Copyright 2012 Pearson Addison-Wesley. All rights reserved. Topics 1. Demand. 2. Supply. 3. Market Equilibrium.

### Econ 98 (CHIU) Midterm 1 Review: Part A Fall 2004

Disclaimer: The review may help you prepare for the exam. The review is not comprehensive and the selected topics may not be representative of the exam. In fact, we do not know what will be on the exam.

### Topic 3. Demand and Supply

Econ 103 Topic 3 page 1 Topic 3 Demand and Supply Text reference: Chapter 3 and 4. Assumptions of the competitive model. Demand: -Determinants of demand -Demand curves -Consumer surplus -Divisibility -

### 2. Demand and Supply

2. Demand and Supply The following materials are taken from Chap. 3 to Chap. 7 of Economics, 2 nd ed., Krugman and Wells(2009), Worth Palgrave MaCmillan. 1 of 42 2. Demand and Supply, and Market Equilibrium

### Economics for Managers, 3e (Farnham) Chapter 2 Demand, Supply, and Equilibrium Prices

Economics for Managers, 3e (Farnham) Chapter 2 Demand, Supply, and Equilibrium Prices 1) According to the case for analysis (Demand and Supply in the Copper Industry) in the text, all of the following

### Ch. 3 LECTURE NOTES Markets II. Demand

Ch. 3 LECTURE NOTES I. Markets A. A market, as introduced in Chapter 2, is an institution or mechanism that brings together buyers (demanders) and sellers (suppliers) of particular goods and services.

### Microeconomics Exam Notes

Microeconomics Exam Notes Opportunity Cost What you give up to get it Production Possibility Frontier Maximum attainable combination of two products (Concept of Opportunity Cost). Main Decision Makers:

### The Foundations of Microeconomics

The Foundations of Microeconomics D I A N N A D A S I L V A - G L A S G O W D E P A R T M E N T O F E C O N O M I C S U N I V E R S I T Y O F G U Y A N A S E P T E M B E R 1 4, 2 0 1 7 Lecture 3... INTRODUCTION

### CFA Exam Review CFA PREREQUISITE ECONOMICS READINGS

CFA Exam Review CFA PREREQUISITE ECONOMICS READINGS Wiley 2016 DemanD and Supply analysis: introduction Reading 13: Demand and Supply Analysis: Introduction LESSON 1: DEMAND AND SUPPLY ANALYSIS: BASIC

### Demand and Supply: An Introduction

Principles of Macroeconomics, 8th Edition - Instructor's Manual - Chapter 2 CHAPTER TWO Demand and Supply: An Introduction Overview Comments This chapter covers one of the most important subjects in economics.

### MICROECONOMICS SECTION I. Time - 70 minutes 60 Questions

MICROECONOMICS SECTION I Time - 70 minutes 60 Questions Directions: Each of the questions or incomplete statements below is followed by five suggested answers or completions. Select the one that is best

### Shifts in Demand and Supply for Goods and Services

Shifts in Demand and Supply for Goods and Services By: OpenStaxCollege The previous module explored how price affects the quantity demanded and the quantity supplied. The result was the demand curve and

### INTRODUCTION ECONOMIC PROFITS

INTRODUCTION This chapter addresses the following key questions: What are profits? What are the unique characteristics of competitive firms? How much output will a competitive firm produce? Chapter 7 THE

### 1. Suppose that policymakers have been convinced that the market price of cheese is too low.

ECNS 251 Homework 3 Supply & Demand II ANSWERS 1. Suppose that policymakers have been convinced that the market price of cheese is too low. a. Suppose the government imposes a binding price floor in the

### 1.3. Levels and Rates of Change Levels: example, wages and income versus Rates: example, inflation and growth Example: Box 1.3

1 Chapter 1 1.1. Scarcity, Choice, Opportunity Cost Definition of Economics: Resources versus Wants Wants: more and better unlimited Versus Needs: essential limited Versus Demand: ability to pay + want

### Chapter 4 Lecture Notes. I. Circular Flow Model Revisited. II. Demand in Product Markets

Chapter 4 Lecture Notes I. Circular Flow Model Revisited Recall that the circular flow model is a simplified representation of how the economy operates. There are two specific individual decision making

2-1 Copyright 2012 Pearson Education. All rights reserved. Chapter 2 Read this chapter together with unit 1 and 2 in the study guide Supply and Demand Topics 1. Demand. 2. Supply. 3. Market Equilibrium.

### After studying this chapter you will be able to

3 Demand and Supply After studying this chapter you will be able to Describe a competitive market and think about a price as an opportunity cost Explain the influences on demand Explain the influences

### Economics 610. Professor Frank Scott Department of Economics University of Kentucky

Economics 610 Professor Frank Scott Department of Economics University of Kentucky Modest goals, 8/30 and 9/6 Introduce myself and the class Go over syllabus and reading assignments Discuss goals for the

### Government Regulation

Government Regulation What do you think is the market price for renting an apartment in Plainfield? What happens to the quantity of demand and supply after the price change? List four outcomes that would

### MICROECONOMICS DIAGRAMS

MICROECONOMICS DIAGRAMS 1. Abnormal Profit 5. Average Fixed Costs 2. ad valorem tax At Qpm, Ppm > Pcost All costs are covered and then some! 6. Average Product The red line diminishes, but never becomes

### Econ Basics. You should copy some information directly into your notebooks (Look for the Dollar Sign) LARGE = Grab as much (all) from the slide

Econ Basics You should copy some information directly into your notebooks (Look for the Dollar Sign) LARGE = Grab as much (all) from the slide small = bookend key phrases or ideas What is Economics? Economics

### SHORT QUESTIONS AND ANSWERS FOR ECO402

SHORT QUESTIONS AND ANSWERS FOR ECO402 Question: How does opportunity cost relate to problem of scarcity? Answer: The problem of scarcity exists because of limited production. Thus, each society must make

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapters 2-4: Additional Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The market system is also known as: A) Central planning B) Production

### Text transcription of Chapter 4 The Market Forces of Supply and Demand

Text transcription of Chapter 4 The Market Forces of Supply and Demand Welcome to the Chapter 4 Lecture on the Market Forces of Supply and Demand. This is the longest chapter for Unit 1, with the most

### Micro Problem Set 1 WCC Winter 2016

Micro Problem Set 1 WCC Winter 2016 True=A/False=B 25 points 1) Your boss wants you to maximize total revenue for Harry Potter lunch boxes. At their current price, the price elasticity of demand for these

### Market Forces. Sherif Khalifa. Sherif Khalifa () Market Forces 1 / 62

Sherif Khalifa Sherif Khalifa () Market Forces 1 / 62 Sherif Khalifa () Market Forces 2 / 62 Sherif Khalifa () Market Forces 3 / 62 Sherif Khalifa () Market Forces 4 / 62 Sherif Khalifa () Market Forces

### Microeconomics. Use the graph below to answer question number 3

More Tutorial at Microeconomics 1. Opportunity costs are the values of the: a. minimal budgets of families on welfare b. hidden charges passed on to consumers c. monetary costs of goods and services *

### Microeconomics. Use the graph below to answer question number 3

More Tutorial at Microeconomics 1. Opportunity costs are the values of the: a. minimal budgets of families on welfare b. hidden charges passed on to consumers c. monetary costs of goods and services *

### Chapter 4: Demand. Section I: Understanding Demand. Section II: Shifts of the Demand Curve. Section III: Elasticity of Demand

Chapter 4: Demand Section I: Understanding Demand Section II: Shifts of the Demand Curve Section III: Elasticity of Demand Section 1: Understanding Demand LEQ: What is the law of demand? VOCAB: demand

### INTI COLLEGE MALAYSIA FOUNDATION IN BUSINESS INFORMATION TECHNOLOGY (CFP) ECO105: ECONOMICS 1 FINAL EXAMINATION: JANUARY 2006 SESSION

ECO105 (F) / Page 1 of 12 Section A INTI COLLEGE MALAYSIA FOUNDATION IN BUSINESS INFORMATION TECHNOLOGY (CFP) ECO105: ECONOMICS 1 FINAL EXAMINATION: JANUARY 2006 SESSION Instructions: This section consists

### Microeconomics: MIE1102

TEXT CHAPTERS TOPICS 1, 2 ECONOMICS, ECONOMIC SYSTEMS, MARKET ECONOMY 3 DEMAND AND SUPPLY. MARKET EQUILIBRIUM 4 ELASTICITY OF DEMAND AND SUPPLY 5 DEMAND & CONSUMER BEHAVIOR 6 PRODUCTION FUNCTION 7 COSTS

### Chapter 5: Price Controls: Multiple Choice Questions Chapter 6: Elasticity Multiple Choice Questions

Chapter 5: Price Controls: Multiple Choice Questions 1. ANSWER: d. ceiling. 2. ANSWER: a. a shortage, which cannot be eliminated through market adjustment. 3. ANSWER: b. the equilibrium price is below

### Introductory Microeconomics. Dr. Lisa Mohanty TUI University

Introductory Microeconomics Dr. Lisa Mohanty TUI University Supply and Demand Forces that make market economies function Determines the quantity of each good produced Demand and Supply in a competitive

### Managerial Economics ECO404 SUPPLY ANALYSIS

SUPPLY ANALYSIS Lesson 5 BASIS FOR SUPPLY The term Supply refers to the quantity of a good or service that producers are willing and able to sell during a certain period under a given set of conditions.

### Test A. The Market Forces of Supply and Demand. Chapter 4

Chapter 4 The Market Forces of Supply and Demand Test A 1. A market is a a. place where only buyers come together. b. place where only sellers meet. c. group of people with common desires. d. group of

### IB Economics Competitive Markets: Demand and Supply 1.4: Price Signals and Market Efficiency

IB Economics: www.ibdeconomics.com 1.4 PRICE SIGNALS AND MARKET EFFICIENCY: STUDENT LEARNING ACTIVITY Answer the questions that follow. 1. DEFINITIONS Define the following terms: [10 marks] Allocative

### Supply and Demand. Chapter 3. McGraw-Hill/Irwin. Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Supply and Demand Chapter 3 McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Learning Objectives 1. Describe how the demand and supply curves summarize the behavior

### !"#\$#%&"'()#*(+,'&\$-''(.#/-'((

Lecture 1 Basic Concerns of Economics What is Economics! Economics is the study of how society manages its scarce resources. o Economic Problem: How a society can satisfy unlimited wants with limited resources

### FINALTERM EXAMINATION FALL 2006

FINALTERM EXAMINATION FALL 2006 QUESTION NO: 1 (MARKS: 1) - PLEASE CHOOSE ONE Compared to the equilibrium price and quantity sold in a competitive market, a monopolist Will charge a price and sell a quantity.

### Chapter 4: Demand Section 2

Chapter 4: Demand Section 2 Objectives 1. Explain the difference between a change in quantity demanded and a shift in the demand curve. 2. Identify the factors that create changes in demand and that can

### Market Equilibrium, the Price Mechanism and Market Efficiency. Chapter 3

Market Equilibrium, the Price Mechanism and Market Efficiency Chapter 3 Equilibrium Equilibrium is defined as a state of rest, self-perpetuating in the absence of any outside disturbance. Example: a book

### Law of Supply. General Economics

Law of Supply General Economics Supply Willing to Offer to the Market at Various Prices during Period of Time Able to Offer to the Market at Various Prices during Period of Time General Economics: Law

### ORGANIZING YOUR THOUGHTSII Use the diagram to help you take notes. Supply and prices are related. Indicate how they are related in the diagram.

Chapter 21, Section 1 For use with textbook pages 462 465 What Is Supply? KEY TERMS supply the various quantities of a good or service that producers are willing to sell at all possible market prices (page

### Economics for Business 23115

Economics for Business 23115 MICROECONOMICS Week 1 Micro 1 Demand and Supply Principles of Economics, Chapter 4 (until page 80 included) The market forces of supply and demand Markets and competition A

### I can explain the law of supply and analyze changes in supply in response to price and determinants.

I can explain the law of supply and analyze changes in supply in response to price and determinants. Success Criteria: Identify determinants of supply and accurately graph changes in supply. Basics of

### Exam#1 Review Economics:

Exam#1 Review Economics: Social Science; Study of choices Resources Renewable Nonrenewable Wants Scarcity Because of scarcity socities and economies have to answer the 3 major economic questions Limited

### Policies that cause demand to differ from supply (Price Ceiling)

Policies that cause demand to differ from supply (Price Ceiling) Economic Analysis about Price Ceiling The Welfare Costs of Rationing by Waiting by Deacon, Robert T and Sonstelie, Jon (1989, Economic Iquiry)

### 1 of 14 5/1/2014 4:56 PM

1 of 14 5/1/2014 4:56 PM Any point on the budget constraint Gives the consumer the highest level of utility. Represent a combination of two goods that are affordable. Represents combinations of two goods

### Eastern Mediterranean University Faculty of Business and Economics Department of Economics Fall Semester

Eastern Mediterranean University Faculty of Business and Economics Department of Economics 2016-17 Fall Semester Duration: 110 minutes ECON101 - Introduction to Economics I Final Exam Type A 11 January

### Chapter 1- Introduction

Chapter 1- Introduction A SIMPLE ECONOMY Central PROBLEMS OF AN ECONOMY: scarcity of resources problem of choice Every society has to decide on how to use its scarce resources. Production, exchange and

### Chapter Outline CHAPTER 2. Definitions (continued) Definitions. Markets. Supply and Demand

Chapter Outline CHATER 2 and Definitions The and Model All About All About Determinants of Determinants of The Effect of Changes in rice Expectations on the and Model Kick it Up a Notch: Why the Equilibrium

### Topic 2: Demand and Supply

Topic 2: Demand and Supply Dr Micheál Collins mlcollin@tcd.ie Topic 2: Demand and Supply 1. Introduction 2. Demand Definition of Demand The Demand Function The Law of Demand The Demand Curve Factors Influencing

### Economics 610. Professor Frank Scott Department of Economics University of Kentucky

Economics 610 Professor Frank Scott Department of Economics University of Kentucky Modest goals, 8/28 and 9/4 Introduce myself and the class Go over syllabus and reading assignments Discuss goals for the

### Economics, so far. Straight line Why? Transferable resources anything that can grow wheat can grow barley

Economics, so far I. Opportunity Cost a. What it is: what is given up b. Our first assumption is that resources money, time, land, etc are LIMITED. c. THUS we make choices. And every choice has an opportunity

### Midterm 2 Sample Questions. Use the demand curve diagram below to answer the following THREE questions.

! Midterm 2 Sample uestions Use the demand curve diagram below to answer the following THREE questions. 8 6 4 2 4 8 12 16 1. What is the own-price elasticity of demand as price decreases from 6 per unit

### 6) Consumer surplus is the red area in the following graph. It is 0.5*5*5=12.5. The answer is C.

These are solutions to Fall 2013 s Econ 1101 Midterm 1. No guarantees are made that this guide is error free, so please consult your TA or instructor if anything looks wrong. 1) If the price of sweeteners,

### Changes in Equilibrium Price and Quantity: The Four-Step Process

OpenStax-CNX module: m48631 1 Changes in Equilibrium Price and Quantity: The Four-Step Process OpenStax College This work is produced by OpenStax-CNX and licensed under the Creative Commons Attribution

### Chapter 2: The Basic Theory Using Demand and Supply. Multiple Choice Questions

Chapter 2: The Basic Theory Using Demand and Supply Multiple Choice Questions 1. If an individual consumes more of good X when his/her income doubles, we can infer that a. the individual is highly sensitive

### Eco402 - Microeconomics Glossary By

Eco402 - Microeconomics Glossary By Break-even point : the point at which price equals the minimum of average total cost. Externalities : the spillover effects of production or consumption for which no