1. Explain the law of demand. Why does a demand curve slope downward? How is a market
demand curve derived from individual demand curves?
supply for a commodity, buyers will change the quantity they demand of that item. If the price
drops, a larger quanti
What effect will each of the following have on the demand for small automobiles such as the
Mini-Cooper and Smart car?
a. Small automobiles become more fashionable.
b. The price of large automobiles rises (with the price of small autos remaining the same)
VII. Application: Government-Set Prices (Ceilings and Floors)
A. Government-set prices prevent the market from reaching the equilibrium price and
B. Price ceilings (gasoline).
1. The maximum legal price a seller may charge, typically placed belo
Changes in Supply and Demand, and Equilibrium
A. Changing demand with supply held constant:
1. Increase in demand will have effect of increasing equilibrium price and quantity
2. Decrease in demand will have effect of decreasing equilibr
1. The law of demand is illustrated by a demand curve that is:
C. Upward sloping
D. Downward sloping
2. Which would cause a decrease in the quantity of computers supplied?
A. An increase in the demand for computers
1. If the market price is above the equilibrium price:
A. A shortage will occur and producers will produce more and lower prices
B. A surplus will occur and producers will produce less and lower prices
C. A surplus will result and consumers will bid price
Supply and Demand: Market Equilibrium
A. Review the text example, key graph figure 3.6, which combines data from supply and
demand schedules for corn.
B. Have students find the point where quantity supplied equals the quantity demanded,
and note this e
1. Table 3.1 provides additional examples.
a. Tastes-favorable change leads to increase in demand; unfavorable change to
b. Number of buyersmore buyers lead to an increase in demand; fewer buyers
lead to a decrease.
c. Incomemore leads to an inc
Changes in Supply and Demand
A. Lettuce (Figure 1)
1. Weather events affect agricultural markets, usually on the supply side.
2. Extreme weather that destroys crops will reduce the supply, raising equilibrium
price and lowering equilibr
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.
B. This chapter focuses on competitive markets with:
1. a large number of