1. Unit 3 – Supply and Demand: Elaboration

2. Categories Terms / ConceptsShiftsShifts 2EquilibriumEquilibrium 2 100 200 300 400 500

3.  Minimum wage is an example of this

4.  Rent control is an example of this

5.  What happens when Demand and Supply both increase?

6.  Which price control leads to a shortage?

7.  When is it possible to determine what happens to PRICE and QUANTITY when supply and demand both shift?

8.  Incomes increase  Price of resources falls  RESULT?

9.  Incomes increase (inferior good)  Price of resources falls  RESULT?

10.  Population decreases  Technology improves  RESULT?

11.  Price of Sub good increases (D)  Price of Sub good decreases (S)  RESULT?

12.  Number of suppliers increases  Price of complementary good decreases  RESULT?

13.  Market: orange juice  Freeze in Florida  Increase price Apple Juice  RESULT?

14.  Market: cigarettes  Anti-smoking policy  Increase cost of tobacco (used to make cigarettes)  RESULT?

15.  Market: Beer  Legal drinking age increased  Lowered cost of production of beer  RESULT?

16.  Market: eyeglasses  Cost of producing lenses falls  Eyeglasses in fashion now  RESULT?

17.  Market: Pencils  All tests now done on Scantrons  Price of wood increases  RESULT?

18. What is initial equilibrium? Pepsi

19. Now, there is a price floor $1 different from equilibrium. What is the result? How much? Pepsi

20. Now, there is a price ceiling $1 different from equilibrium. What is the result? How much?

21. Demand and Supply have shifted. What is new equilibrium? How much are consumers spending at this new equilibrium?

22. After the shifts, government imposes a price ceiling $0.50 different from equilibrium. What results?

23. Look at initial curves: at a price of $3, what occurs? What is the quantity value?

24. Look at initial curves: at a price of $3, what is the dollar value of the shortage / surplus?

25. Look at the new equilibrium: what occurs at an imposed price of $1? What is the quantity value?

26. Look at the new equilibrium: at an imposed price of $1, what can the government do to take care of the resulting situation? (ALL options)

27.  Illustrate using a graph, how a change in the SAME DIRECTION of the supply and demand curves produces the following:  Price Increases, quantity decreases