1. Microeconomics: The Price System at Work by: Chanon Amphan, Joel Fonseca, Ezekiel Knowlin, and Joshua Pope UNIT 2 CHAPTER 6 SECTION 2

2. Slide 1 Main- How changes in deman and supply cause prices to change. Key Terms- Economic Model, Market Equilibrium, Surplus, Shortage, and Equilibrium

3. Slide 2 Economic Model-set of assumptions that can be listed in a table, illustrated with a graph, or even stated algebraically to help analyze behavior and predict outcomes Market Equilibrium-situation in which quantity demanded is equal to the supply

4. Slide 3 Surplus - have extra product after selling Shortage - don't have enough product Equilibrium Price - price at which market equilibrium is achieved

5. Slide 4 Economists use market models to help predict and explain market prices. Changes in price are almost always caused by a change in demand, supply, or both. Economists and/or producers can set up supply-demand curves to help anticipate unpredictable events and to help account for elasticity

6. Slide 5 Theory of Competitive Pricing-describes ideal conditions of an ideal competitive economic system for the purpose of comparing real-world non-ideal systems -Producers naturally vie for consumer attention with lowered prices and advertising -Market is ideally completely self-sufficient because of natural tendencies of producers and consumers

7. Question 1 What is an economic model?

8. Answer 1 It is a set of assumptions that can be listed in a table, illustrated with a graph, or even stated algebraically to help analyze behavior and predict outcomes

9. Question 2 The adjustment process in a competitive market moves toward ________.

10. Answer 2 market equilibrium

11. Question 3 What is a shortage?

12. Answer 3 A shortage is a situation in which the quantity demanded is greater than the quantity supplied at one price.

13. Question 4 True/False A situation without surplus or shortage means equilibrium has been reached.

14. Answer 4 True

15. Question 5 True/False Economists use market models to help predict and explain prices.

16. Answer 5 True