| Form
4 Economics Note on Chapter 3 |
|
After studying chapter 3, you MUST be able to
Distinguish between demand and quantity demanded
State the demand law
Derive the market demand curve from individual demand curves
Distinguish between supply and quantity supplied
State the supply law
Derive the market supply curve from individual supply curves
Determine equilibrium price and quantity algebraically and graphically
Define shortage and sketch the diagram
Define surplus and sketch the diagram
Points to
be noted
If Qd ?Qs , Qt = min { Qd , Qs
}
Shortage : not all consumers being served ( surplus : not all goods being
sold )
When the price is below ( above ) the equilibrium price level
The quantity demanded is greater ( smaller ) than the quantity supplied
| Shortage
( surplus ) exists |
| -The
only cause of shortage / surplus : price cannot be adjusted to the equilibrium level |
| -The
ways to eliminate shortage |
| -Increase
supply |
| -Decrease
in demand |
| -Increase
price to the equilibrium level |
