AP Econ Ch.3 Notes
Chapter Three
Individual Markets:
Demand and Supply
CHAPTER OVERVIEW
This chapter provides a basic, but rather detailed introduction to how markets operate as well as an introduction to demand and supply concepts. Both demand and supply are defined and illustrated; determinants of demand and supply are listed and explained. The concept of equilibrium and the effects of changes in demand and supply on equilibrium price and quantity are explained and illustrated. The chapter also includes brief discussions of supply and demand factors in resource markets and the importance of the ceteris paribus assumption.
WHAT’S NEW?
This chapter contains most of what was in the previous edition, but has several new examples. The examples in Tables 3-3 and 3-7 have been changed
INSTRUCTIONAL OBJECTIVES
After completing this chapter, students should be able to:
1. Identify why price and quantity demanded are inversely related and why price and quantity supplied are directly related.
2. Differentiate between demand and quantity demanded; and supply and quantity supplied.
3. Graph demand and supply curves when given demand and supply schedules.
4. State the Law of Demand and the Law of Supply.
5. List the major determinants of demand.
6. List the major determinants of supply.
7. Explain the concept of equilibrium price and quantity.
8. Illustrate graphically equilibrium price and quantity.
9. Explain the effects of changes in demand and supply on equilibrium price and quantity.
10. Explain the effects of a price change for one good on the demand for its substitutes or complements.
11. Give an example of the rationing function of prices.
12. Explain briefly how concepts of supply and demand apply to resource markets.
13. Define and identify terms and concepts listed at the end of the chapter.
COMMENTS AND TEACHING SUGGESTIONS
1. Emphasis in this chapter should be placed on: (a) The fact that demand and supply are schedules; (b) the
Individual Markets:
Demand and Supply
CHAPTER OVERVIEW
This chapter provides a basic, but rather detailed introduction to how markets operate as well as an introduction to demand and supply concepts. Both demand and supply are defined and illustrated; determinants of demand and supply are listed and explained. The concept of equilibrium and the effects of changes in demand and supply on equilibrium price and quantity are explained and illustrated. The chapter also includes brief discussions of supply and demand factors in resource markets and the importance of the ceteris paribus assumption.
WHAT’S NEW?
This chapter contains most of what was in the previous edition, but has several new examples. The examples in Tables 3-3 and 3-7 have been changed
INSTRUCTIONAL OBJECTIVES
After completing this chapter, students should be able to:
1. Identify why price and quantity demanded are inversely related and why price and quantity supplied are directly related.
2. Differentiate between demand and quantity demanded; and supply and quantity supplied.
3. Graph demand and supply curves when given demand and supply schedules.
4. State the Law of Demand and the Law of Supply.
5. List the major determinants of demand.
6. List the major determinants of supply.
7. Explain the concept of equilibrium price and quantity.
8. Illustrate graphically equilibrium price and quantity.
9. Explain the effects of changes in demand and supply on equilibrium price and quantity.
10. Explain the effects of a price change for one good on the demand for its substitutes or complements.
11. Give an example of the rationing function of prices.
12. Explain briefly how concepts of supply and demand apply to resource markets.
13. Define and identify terms and concepts listed at the end of the chapter.
COMMENTS AND TEACHING SUGGESTIONS
1. Emphasis in this chapter should be placed on: (a) The fact that demand and supply are schedules; (b) the