2. What is the purpose of supply and demand? They determine the price of a good or service

3. How does supply and demand work together to determine price? The forces of supply and demand act in opposite ways when it comes to the price of goods and services. Eventually, the producer and consumers will come to an agreement with the price.

4. What is it called when the producer and consumers come to an agreement on the price of a good? equilibrium price

5. How is equilibrium shown on a supply and demand curve graph? A. Is located where the supply curve line and demand curve lines cross.

6. What is a surplus? When there are extra or too many goods that could not be sold.

7. When does a surplus occur? A. If the producer sets the price for its goods too high, they will cause a surplus. B. A price set above the equilibrium causes a surplus.

8. What is a shortage? is when there is not enough or too few goods to meet the demand of the consumers. Shortage

9. When does a shortage occur? If the producer sets the price too low for a good, then there will not be enough to meet consumers’ demand. A price set above the equilibrium causes a surplus.

11. Besides supply and demand determining the price of a good or service, what else can determine price? A. The government a. may fix (set ) the price of some goods and services.

12. Why might the government fix prices? 1.to deal with a shortage of a good. 2.to make goods more affordable. 3.discourage the use of a good. 4.to improve wages.

13. How does the government fix prices? 1)Price ceilings 2)Price floors

14. What is a PRICE CEILING? when the government sets a maximum (highest ) price for a good.

15. What is PRICE FLOOR? when the government sets the price for a good or service at a minimum (lowest ) price.