Chapter 3: Market Supply and Demand
LEARNING OBJECTIVES
#1 - Understand that a “change in quantity demanded” is a movement along a demand curve, and a “change in demand” is a shift in the demand curve.
Step 1 Read the sections in your textbook titled “Law of Demand,” “The Distinction Between Changes in Quantity Demanded and Change in Demand” and “Nonprice Determinants of Demand.”
Step 2 Watch the Graphing Workshop “See It!” tutorial titled “Demand, Shifts in Demand.” Study the factors that shift the demand for milk.
Step 3 Read the Graphing Workshop “Grasp It!” exercise titled “Demand.” This exercise uses a slider bar to demonstrate the concept of demand using the daily demand for hamburgers in a medium-sized city.
Step 4 Create a new graph at the Graphing Workshop “Try It!” exercise titled “Demand.” This exercise illustrates the impact of a change in income on the demand for CDs.
Step 5 Play the “Causation Chains Game” titled “Movement Along a Demand Curve Versus a Shift in Demand.”
Step 6 Listen to the “Ask the Instructor Video Clip” titled “What Factors Affect the Auction Price of Your House?” Notice the nonprice determinants of demand that affect the price of a house at an auction.
Step 7 Listen to the “Ask the Instructor Video Clip” titled “How Would You Like to be in the “Inferior” Goods Business?” You will learn the economist’s definition of inferior goods versus the everyday use of this term.
Step 8 Watch the CNN Video Clip titled “Smokers and the Bandit” and analyze how smoking behavior responded to a price hike.
Step 9 Read the EconNews article titled “I’ll Replace that Hip for $49.95.” This article describes how lower prices increased the quantity of health care in India.
The Result By following the steps above, you have learned that demand describes buyer behavior and a change in the price for a good or service causes a movement along a demand curve. You have also learned that changes in nonprice factors shift the demand curve leftward or rightward.
#2 - Understand that a “change in quantity supplied” is a movement along a supply curve, and a “change in supply” is a shift in the supply curve.
Step 1 Read the sections in your textbook titled “Law of Supply,” “The Distinction Between Changes in Quantity Supplied and Change in Supply” and “Nonprice Determinants of Supply.”
Step 2 Watch the Graphing Workshop “See It!” tutorial titled “Supply, Shifts in Supply.” Study the factors that shift the supply for milk.
Step 3 Read the Graphing Workshop “Grasp It!” exercise titled “Supply.” This exercise uses a slider bar to demonstrate the concept of supply using the daily supply of hamburgers in a medium-sized city.
Step 4 Create a new graph at the Graphing Workshop “Try It!” exercise titled “Supply.” This exercise illustrates the impact of a change in income on the supply of personal computers.
Step 5 Play the “Causation Chains Game” titled “Movement Along a Supply Curve Versus a Shift in Supply.”
Step 6 Read the EconNews article titled “Airlines Are in for a Long Road This Summer.” This article describes how cost increases have shifted the supply curve in the airline industry.
The Result By following the steps above, you have learned that supply describes seller behavior and a change in the price for a good or service causes a movement along the supply curve. You have also learned changes in nonprice factors shift the supply curve leftward or rightward.
#3 - Understand that equilibrium exists at the price and quantity where the quantity demanded equals the quantity supplied.
Step 1 Read the section in your textbook titled “A Market Supply and Demand Analysis.”
Step 2 Watch the Graphing Workshop “See It!” tutorial titled “Market Equilibrium.” Study how market equilibrium is established for milk.
Step 3 Read the Graphing Workshop “Grasp It!” exercise titled “Market Equilibrium.” This exercise uses a slider bar to demonstrate the concept of market equilibrium for hamburgers.
Step 4 Create a new graph at the Graphing Workshop “Try It!” exercise titled “Market Equilibrium.” This exercise illustrates how the intersection of the demand and supply curves establishes market equilibrium.
Step 5 Play the “Causation Chains Game” titled “Equilibrium and the Price System.”
Step 6 Read the EconNews titled “The Railroads Are So Busy, They Don’t Know if They’re Coming or Going.” This article describes factors that are changing the rates charged by railroads.
Step 7 Read the EconDebate titled “Should There be a Market for Human Organs.” This article describes the limited supply of organs problem in the United States.
The Result By following the steps above, you have learned that the initial equilibrium occurs at the point where the demand curve crosses the supply curve. You also have learned that either a market surplus or shortage provides the mechanism that establishes the equilibrium price and equilibrium quantity.