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Economics Study Guide Unit 2

Ms. Walker

 The law of demand states that:___________________________________________________________

 The law of supply states that:_____________________________________________________________

 Demand Shifters (6):____________________________________________________________________

 Supply Shifters(6):______________________________________________________________________

 Equilibrium Price:______________________________________________________________________

 Equilibrium price is also called:____________________________________________________________

 Equilibrium Quantity:___________________________________________________________________

 Elasticity:_____________________________________________________________________________

 Marginal Utility:_______________________________________________________________________

 A shortage results when prices are too_____________and quantity supplied is greater/lesser than
quanitity demanded.

 A surplus results when prices are too______________and quantity supplied is greater/lesser than
quantity demanded.

 Ways in which government can exert control/influence supply & demand:

1. price floors_____________________________________________________________

2. price ceilings____________________________________________________________

3. excise taxes_____________________________________________________________

 Why would a government decide to ration?___________________________________________________

Use the graph below to answer the following question.




 The price at which supply and demand are in balance is known as:________________________________

 The equilibrium price of Mac Pro laptops is $1300. Because of stiff competition in the tablet market,
Apple decides to drop all their prices by 10% but does not change their production plans. The effect on
the market for Mac pro laptops is:

a. Excess demand for the competitor’s tablets

b. Excess supply of Mac Pros
c. Equilibrium quantity
d. Shortage of Mac Pros

Indicate the letter of the graph which best illustrates changes to the equilibrium price and quantity for each
situation given. You may use a graph more than once.

Graph A Graph B Graph C Graph D

S S1

D1 D
D D1
 Which graph shows a decrease in equilibrium price but an increase in equilibrium quantity?
a. Graph A b. Graph B c. Graph C d. Graph D

 Which graph shows an increase in equilibrium price but a decrease in equilibrium quantity?
a. Graph A b. Graph B c. Graph C d. Graph D

 Which graph shows a decrease in equilibrium price and a decrease in equilibrium quantity?
a. Graph A b. Graph B c. Graph C d. Graph D
Market Structures

 What factors determine the market structure of a specific market_______________________________


 In a market with perfect competition, how are prices determined?_______________________________

 How are prices determined in an oligopoly?_________________________________________________

 Collusion:_____________________________________________________________________________

 Cartel:________________________________________________________________________________

 What examples can you think of that fall under the category of oligopoly, where a few companies dominate the
market, would be an example of which type of market structure?

 As it becomes easier to start a new business in a market, what effect is there on competition?

 In which market structure do producers have the most power?


 What is meant by the term “Public Goods”:__________________________________________________

 Positive Externality:______________________________________________________________________

 Negative Externality:_____________________________________________________________________

 Why doesn’t the market system work to provide street lighting and other public goods?

 What is meant by “excludable and non-excludable with regard to public goods?:


 Define the “free rider problem”:


 What is an example of a positive externality in a scenario where there is an outdoor concert?