Micro Supply and Demand Review

Demand SupplyThe Law of Demand:

P↑ Qd P↓ Qd

The Law of Supply:P↑ Qs P↓ Qs

What is the different between a change in quantity demanded and a change in demand?

Changes in Demand and Supply (Shifting the Curve)What changes demand? (5 Shifters of Demand) What changes supply? (5 Shifters of Supply)

Substitutes: Price of A↑ Demand for B ___Price of A↓ Demand for B ___

Complements: Price of A↑ Demand for B ___Price of A↓ Demand for B ___

Normal Goods: Income ↑ Demand ____Income ↓ Demand ____

Inferior Goods: Income ↑ Demand ____Income ↓ Demand ____

Equilibrium and Disequilibrium Government InvolvementDraw a shortage Draw a surplus Price Ceiling-

When binding, ceilings go equilibrium and result in a

Price Floor-

When binding, floors go equilibrium and result in a

Subsidy-

Supply and Demand Practice Double Shift PracticeDemand Decrease

Price Quantity __

Demand Increase

Price Quantity __

If demand increases AND supply increases then price ______ and quantity __________

Price

QuantityDouble Shift Rule:

Supply Decrease

Price Quantity __

Supply Increase

Price Quantity __

“Price Floors and Ceilings” is from Advanced Placement Economics: Microeconomics: Student Activities, by John S. Morton, National Council on Economic Education, 1996.

Price floors and ceilings can be plotted with supply and demand curves. Use the chart to answer the questions. Fill in the answer blanks and, where applicable, circle the correct word in parentheses.

1. What is the market price? _______________

2. What quantity is demanded and what quantity is supplied at the market price?

a. Quantity demanded _______________

b. Quantity supplied _______________

3. What quantity is demanded and what quantity is supplied if the government passes a law requiring the price to be no higher than $30? This is called a price ceiling.

a. Quantity demanded _______________

b. Quantity supplied _______________

c. There is a (shortage/surplus) of _______________.

4. What quantity is demanded and what quantity is supplied if the government passes a law requiring the price to be no lower than $80? This is called a price floor.

a. Quantity demanded _______________

b. Quantity supplied _______________

c. There is a (shortage/surplus) of _______________.