Chapter 02  Supply and Demand
Chapter 2:
Supply and Demand
Main Concepts and Learning Objectives
This chapter provides a quick review of introductory microeconomic information about
shifting and moving along supply and demand curves.
It builds on this information by
showing students how to:
•
Use equations to describe supply and demand curves
•
Solve for price, given a current quantity and a set of exogenous parameter values
•
Solve for equilibrium
•
Solve for price elasticity, given a linear demand equation
The following skills are needed to master the material presented in this chapter:
•
Introductory microeconomicslevel understanding of supply and demand curves,
movement along these curves and shifts in these curves.
A brief review of these
concepts is included in the chapter.
•
Basic algebra skills:
o
Solve one equation for one unknown
o
Solve two equations for two unknowns
o
Manipulate an equation to write the equation in a new form
o
Identify slope as the change in the dependent variable over the change in
the independent variable
Specifically, students who master the material presented in this chapter will be able to:
1.
Distinguish between shifts in the demand curve and movements along the demand
curve.
2.
Use a demand equation, along with information about current values of exogenous
variable, to solve for the price at which the quantity demanded will be equal to a
specified value.
3.
Distinguish between shifts in the supply curve and movements along the supply
curve.
4.
Use a supply equation, along with information about current values of exogenous
variable, to solve for the price at which the quantity supplied will be equal to a
specified value.
5.
Use a supply curve, a demand curve, and information about the values of exogenous
variables to compute equilibrium price and quantity.
6.
Use a supply curve, a demand curve, and information about the values of exogenous
variables to compute the impact of a parameter change on equilibrium price and
quantity.
7.
Use information about the slope the demand curve to deduce information about
relative magnitudes of changes in price and quantity that will occur in response to
shifts in supply.
8.
Use information about the slope the supply curve to deduce information about relative
magnitudes of changes in price and quantity that will occur in response to shifts in
demand.
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9.
Write the elasticity formula in a new form that clearly identifies the relationship
between slope and elasticity
10. Use a linear demand curve, along with information about current P and Q to compute
elasticity.
Multiple Choice Quiz (10 questions) covering main points:
1.
In Equation (1) (in the text), the fact that the coefficient for the price of potatoes is a
positive number provides information about the relationship between potatoes and corn.
It tells you that corn and potatoes are:
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 Spring '11
 Craig
 Supply And Demand, Qdcorn, Pcorn, Qscorn

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