1. What’s Happening with Demand, Supply, and Equilibrium
Ch’s 3 Test Review
AP Macro/Mr. P.

2. Willingness
and ability to buy
at a given price
Demand

3. Less quantity is bought when prices are high
More quantity is bought when prices are low
Less quantity is bought when prices are high
Law of Demand

4. Caused by a price change
Movement along a stable demand curve
Caused by a price change
Change in Quantity Demanded

5. Amount bought at all prices
Shown by a shift of the entire demand curve
Change in Demand

6. TRIPE or factors that cause a Change in Demand
Tastes and Preferences, Related Goods, Income, population, and expectations
Shifts the entire demand curve
TRIPE or factors that cause a Change in Demand

7. Increase in Demand P S p1 p D1 D Q q q1
D  .: P ↑ & Q ↑

8. Decrease in Demand P S p p1 D D1 Q q1 q
D  .: P↓ & Q↓

9. and ability to sell a product
Willingness
and ability to sell a product
at a given price
Supply

10. Less quantity is offered for sale when prices are low
More quantity is offered for sale when prices are high
Less quantity is offered for sale when prices are low
Law of Supply

11. Caused by a price change
Movement along a stable supply curve
Caused by a price change
Change in Quantity Supplied

12. Amount offered for sale at all prices
Shown by a shift of
a supply curve
Change in Supply

13. NICEPP or factors that cause a Change in Supply
Natural/Manmade, input cost, competition, future expectations, profitability of alternate products and by products.
Shifts the entire supply curve
NICEPP or factors that cause a Change in Supply

14. Increase in Supply P S S1 p p1 D Q q q1
S  .: P ↓ & Q ↑

15. Decrease in Supply S1 P S p1 p D Q q1 q
S  .: P↑ & Q↓

16. I can’t get no…..
Satisfaction
From consuming a good
Utility

17. Diminishing Marginal Utility
Mmmm. Sushi
First one tastes best
Less satisfaction as I consume more and more.
Diminishing Marginal Utility

18. Peanut Butter and Jelly
Goods that “go together”
Complements

19. Apples and Pears
I like both products
Substitutes

20. When things are expensive money buys less
When things are cheap money buys more
Income Effect

21. Quantity supplied is more than quantity demanded
Situation when price offered for sale is more than the equilibrium price.
Quantity supplied is more than quantity demanded
Surplus

22. Quantity demanded is more than quantity supplied.
Situation when price offered for sale is less than the equilibrium price.
Quantity demanded is more than quantity supplied.
Shortage

23. When demand increases:
The demand curve shifts_____.
rightward
Equilibrium price and quantity ______
increase

24. Increase in Demand P S p1 p D1 D Q q q1
D  .: P ↑ & Q ↑

25. When demand decreases:
The demand curve shifts_____.
leftward
Equilibrium price and quantity ______
decrease

26. Decrease in Demand P S p p1 D D1 Q q1 q
D  .: P↓ & Q↓

27. When supply increases:
The supply curve shifts_____.
rightward
Equilibrium price ______
decreases
Equilibrium quantity ______
increases

28. Increase in Supply P S S1 p p1 D Q q q1
S  .: P ↓ & Q ↑

29. When supply decreases:
The supply curve shifts_____.
leftward
Equilibrium price ______
increases
Equilibrium quantity ______
decreases

30. Decrease in Supply S1 P S p1 p D Q q1 q
S  .: P↑ & Q↓

31. Simultaneous Changes in Supply and Demand
If supply and demand both increase then price is _____________ and quantity is ________________.
price is indeterminate, but quantity definitely increases

32. Simultaneous Increase in Supply & DemandQ q q1 q2
S  & D  .: P ? & Q ↑

33. price is indeterminate, but quantity definitely decreases
If supply and demand both decrease then price is __________ and quantity is __________.
price is indeterminate, but quantity definitely decreases

34. Simultaneous Decrease in Supply & DemandQ q2 q1 q
S  & D  .: P ? & Q↓

35. Simultaneous Changes in Supply and Demand
If supply decreases while demand increases, then price is ________ and quantity is ___________.
then price definitely increases while quantity is indeterminate

36. Decrease in Supply w/ Simultaneous Increase in DemandQ q1 q
S  & D  .: P↑ & Q ?

37. If supply increases while demand decreases, then price is ________ and quantity is _____________.
then price definitely decreases while quantity is indeterminate

38. Increase in Supply w/ Simultaneous Decrease in DemandQ q q1
S  & D  .: P↓ & Q?

39. Causes of Disequilibrium
– a minimum price for a good/service or resource determined outside of the market
Price floor
Ex. Minimum wage

40. A maximum price for a good/service or resource determined outside of the market
Price ceiling
Ex. Rent control on apartments in Manhattan, New York