Economics Price Determination Study Guide Chapter 4, 5, 6 Name________________________ Hr. _________ Due Date________________ Please read pages 78-89, 100-104, 116-120, and 124-144. 1. What is demand? 2. Explain the law of demand. 3. The law of demand is the result of what two patterns of behavior? Provide an example for each effect. 4. What does a demand schedule show for an individual and a market? 5. How do economists create a demand curve? Why does the demand curve slope downward and to the right? 6. What is the definition of ceteris paribus? 7. What is the difference between a change in quantity demanded and a change in demand? 8. List and describe the major reasons that cause the entire demand curve to change/shift? 9. What are complement and substitute goods? Provide an example for each good. 10. What is supply? 11. Explain the law of supply. 12. What does a market supply schedule show? 13. Why does the supply curve rise from left to right? 14. What is the difference between a change in quantity supplied and a change in supply? 15. List and describe the seven major reasons that cause an entire supply curve to change/shift. 16. What is the point called where quantity demanded and quantity supplied are equal? Where can you find this point on the graph? 17. What is meant by excess demand? What will happen with prices as long as there is excess demand? 18. What is meant by excess supply? What will happen with prices over time if there is excess supply? 19. What are the goals of a price ceiling and rent control? What problems does it create? 20. What is the goal of a price floor? What problems does it create? What are two examples of a price floor? 21. What conditions lead to a surplus? Where is the new equilibrium located in figure 6.6 (P. 135) if the original supply curve shifts to the new supply curve (shift to the right)? 22. What conditions lead to a shortage? 23. List and describe the advantages of prices in a market system. 24. How does a supply shock affect equilibrium price and quantity? 25. How is rationing different from a price-based market system? 26. What is a black market? Why do black markets exist in a ration-based economy? 27. What is one reason resources are allocated efficiently in a market system? 28. What are three problems to the idea that markets lead to an efficient allocation of resources? Be sure to explain each problem.