1. Chapter 8 Review

2. Law of Demand When Price Increase Quantity Demanded will Decrease
When Price Decreases, Quantity Demanded will Increase
Quantity Demanded & Price = Inverse Relationship

3. Determinants of Demand
Price (Movement)
Number of Buyers (Shift)
Income (Shift)
Price of Related Goods (Shift)
Expectations (Shift)
Tastes/Preferences (Shift)

4. Elastic Demand
A fall in price will greatly affect the amount people are willing to buy
These goods usually have substitutes

5. Inelastic Demand
A price change does not result in a substantial change in the Quantity Demanded
These goods do not have substitutes
Insulin, Fuel, etc.

6. Law of Supply
As the price rises for a good, the quantity supplied also rises
As the price falls the quantity supplied will also fall
Price and Quantity Supplied have Direct Relationship

7. Determinants of Supply
Price (Movement)
Input Prices (Shift)
Technology (Shift)
Number of Firms (Shift)
Expectations (Shift)

8. Equilibrium S D
When Price has reached the level where quantity supplied equals quantity demanded

9. Shortages S D
When Quantity Demanded is greater than quantity supplied
Shortage

10. Surpluses S D
Surplus
When Quantity Supplied is greater than Quantity Demanded

11. Price Ceilings Legal Limit on how high a price can be
Must be BELOW market equilibrium in order to be effective
Price Ceilings will cause a shortage

12. Price Floors Legal Limit on how low a good can be priced
Price Floors must be set ABOVE market equilibrium
Price Floors will Cause a Surplus