Section 1 supply and demand work together to

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Unformatted text preview: ing make sure th ✔ ✔ Chapter 6 Price: Supply and Demand Together 149 06 (128-153) EMC Chap 06 5/8/06 4:52 PM Page 150 Economics Vocabulary Chapter Summary Be sure you know and remember the following key points from the chapter sections. Section 1 Supply and demand work together to determine price. A surplus exists when quantity supplied is greater than quantity demanded. A shortage exists when quantity demanded is greater than quantity supplied. A market reaches equilibrium when the quantity of a good that buyers are willing and able to buy is equal to the quantity of the good that sellers are willing and able to produce and offer for sale, and is shown as the intersection point of the supply and demand curves. The cost of storing inventories is part of the reason prices decrease when a surplus occurs. A shift in the demand curve will cause prices to increase or decrease. A shift in the supply curve will also cause a change in price. Governments sometimes legislate price controls: a price ceiling sets a level that a price for a good cannot go above legally, and a price floor is the lowest price at which a good can be sold legally. Section 2 A shortage in a market causes price to increase. A surplus in a market causes price to decrease. The laws of supply and demand affect many areas of our lives: the price of goods and services, the likelihood of getting into a certain university or on a certain sports team, how much traffic is on the roads, and how much money we earn in our jobs. All other factors being the same, prices and quantity will always move toward the equilibrium point. 150 Chapter 6 Price: Supply and Demand Together To reinforce your knowledge of the key terms in this chapter, fill in the following blanks on a separate piece of paper with the appropriate word or phrase. 1. A(n) ______ exists when quantity supplied is greater than quantity demanded. 2. A(n) ______ exists when quantity demanded is greater than quantity supplied. 3. A market is in ______ when quantity demanded equals...
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