Supply Demand Review for Unit Test SD Unit

Supply & Demand Review for Unit Test

SD Unit Test • Study Guide on Website – Mandatory for all students • Gov’t Price Controls – Price Floors & Price Ceilings • Supply & Demand Curve Shifts – TIPSE & TIN • Inelastic & Elastic Demand Curves – Total revenue • Stock Market Terms – P. E. Ratio, Market Capitalization

Government Price Controls Market for T-Shirts $1500 . $1000 E 1 ------- $800 S 1 Shortage of Supply Less T-Shirts are sold after $8 price ceiling! Q 2 20, 000 Price Ceiling D 1

Determinants of Demand TIPSE Tastes, income, population Price substitutes/complements, expectations Change in Demand (NEW Demand Curve) Determinants of Supply TIN Technology, input prices number-sellers Change in Supply (NEW Supply Curve)

Economic Event: Price of casual pants rises TIPSE ↓ Substitute Price ↑ ↓ Blue Jeans Demand ↑ Price (shifts right) S 1 End Result: P 2 --------------- E 2 $40 ------- E 1 10 K Q 2 1) Change (increase) in Demand & 2) Change (increase) in Quantity Supplied (move along supply curve) D 1 D 2 Qty

ELASTIC DEMAND Demand sensitive to price changes P ↑ => TR ↓ INELASTIC DEMAND Demand not sensitive to price changes P ↑ => TR ↑

Practice Test