Ap Micro Chapter 3 Outline
AP Microeconomics – Chapter 3
Outline
I. Learning Objectives – In this chapter students should learn:
A. What demand is and how it can change.
B. What supply is and how it can change.
C. How supply and demand interact to determine market equilibrium.
D. How changes in supply and demand affect equilibrium prices and quantities.
E. What government‐set prices are and how they can cause product surpluses and shortages. II. Markets
A. A market, as introduced in Chapter 2, is an institution or mechanism that brings together buyers (demanders) and sellers (suppliers) of particular goods and services.
B. This chapter focuses on competitive markets with:
1. A large number of independent buyers and sellers.
2. Standardized goods.
3. Prices that are “discovered” through the interaction of buyers and sellers. No individual can dictate the market price.
C. The goal of the chapter is to explain the way in which markets adjust to changes and the role of prices in bringing the markets toward equilibrium.
III. Demand
A. Demand is a schedule or curve that shows the various amounts of a product that consumers are willing and able to buy at each specific price in a series of possible prices during a specified time period.
1. Figure 3.1 illustrates a demand schedule for corn.
2. The schedule shows how much corn buyers are willing and able to purchase at five possible prices.
3. The market price depends on demand and supply.
4. To be meaningful, the demand schedule must have a period of time associated with it.
B. The law of demand is a fundamental characteristic of demand behavior.
AP Microeconomics – Chapter 3
Outline
1. Other things being equal, as price increases, the quantity demanded falls.
2. Restated, there is an inverse relationship between price and quantity demanded.
3. Note the “other‐things‐equal” assumption refers to consumer income and tastes, prices of related goods,
Outline
I. Learning Objectives – In this chapter students should learn:
A. What demand is and how it can change.
B. What supply is and how it can change.
C. How supply and demand interact to determine market equilibrium.
D. How changes in supply and demand affect equilibrium prices and quantities.
E. What government‐set prices are and how they can cause product surpluses and shortages. II. Markets
A. A market, as introduced in Chapter 2, is an institution or mechanism that brings together buyers (demanders) and sellers (suppliers) of particular goods and services.
B. This chapter focuses on competitive markets with:
1. A large number of independent buyers and sellers.
2. Standardized goods.
3. Prices that are “discovered” through the interaction of buyers and sellers. No individual can dictate the market price.
C. The goal of the chapter is to explain the way in which markets adjust to changes and the role of prices in bringing the markets toward equilibrium.
III. Demand
A. Demand is a schedule or curve that shows the various amounts of a product that consumers are willing and able to buy at each specific price in a series of possible prices during a specified time period.
1. Figure 3.1 illustrates a demand schedule for corn.
2. The schedule shows how much corn buyers are willing and able to purchase at five possible prices.
3. The market price depends on demand and supply.
4. To be meaningful, the demand schedule must have a period of time associated with it.
B. The law of demand is a fundamental characteristic of demand behavior.
AP Microeconomics – Chapter 3
Outline
1. Other things being equal, as price increases, the quantity demanded falls.
2. Restated, there is an inverse relationship between price and quantity demanded.
3. Note the “other‐things‐equal” assumption refers to consumer income and tastes, prices of related goods,