Econ Unit Test: Micro 2 - Supply and Demand
SSEMI2 Explain how the law of demand, the law of supply, and prices work to determine production and distribution in a market economy.
a. Define the law of supply and the law of demand.
b. Distinguish between supply and quantity supplied, and demand and quantity demanded.
c. Describe the role of buyers and sellers in determining market clearing price (i.e., equilibrium).
d. Illustrate on a graph how supply and demand determine equilibrium price and quantity.
e. Identify the determinants (shifters) of supply (e.g., changes in costs of productive resources, government regulations, number of sellers, producer expectations, technology, and education) and illustrate the effects on a supply and demand graph.
f. Identify the determinants (shifters) of demand (e.g., changes in related goods, income, consumer expectations, preferences/tastes, and number of consumers) and illustrate the effects on a supply and demand graph.
g. Explain and illustrate on a graph how prices set too high (e.g., price floors) create surpluses, and prices set too low (e.g., price ceilings) create shortages.