Demand, Supply, and Equilibrium in Markets for Goods and Services

Review Questions

What determines the level of prices in a market?

What does a downward-sloping demand curve mean about how buyers in a market will react to a higher price?

Will demand curves have the same exact shape in all markets? If not, how will they differ?

Will supply curves have the same shape in all markets? If not, how will they differ?

What is the relationship between quantity demanded and quantity supplied at equilibrium? What is the relationship when there is a shortage? What is the relationship when there is a surplus?

How can you locate the equilibrium point on a demand and supply graph?

If the price is above the equilibrium level, would you predict a surplus or a shortage? If the price is below the equilibrium level, would you predict a surplus or a shortage? Why?

When the price is above the equilibrium, explain how market forces move the market price to equilibrium. Do the same when the price is below the equilibrium.

What is the difference between the demand and the quantity demanded of a product, say milk? Explain in words and show the difference on a graph with a demand curve for milk.

What is the difference between the supply and the quantity supplied of a product, say milk? Explain in words and show the difference on a graph with the supply curve for milk.