Supply & Demand Analysis - Learning Objectives

After studying this module, you should be able to:
• define supply and demand analysis and explain its function.
• explain how supply and demand are relationships between the price of a product and the quantity of the same product.
• define and explain the difference between demand and quantity demanded.
• define and explain the law of demand.
• define and explain the difference between a demand schedule and a demand curve.
• draw and explain how a demand curve illustrates the law of demand.
• show how the quantity demanded at a particular price is illustrated by the horizontal distance between the vertical axis and the demand curve.
• define and explain income and substitution effects.
• illustrate and explain how shifts in supply and demand occur to the right for increases and to the left for decreases.
• list and explain things that cause a demand curve to shift to the right.
• list and explain things that cause a demand curve to shift to the left.
• illustrate and explain how an increase in the number of consumers increases the demand for a product.
• define and explain the difference between normal goods and inferior goods.
• provide examples of products that are generally considered to be inferior goods.
• provide examples of products that are generally considered to be normal goods.
• illustrate and explain how an increase in income increases the demand for a normal good.
• illustrate and explain how an increase in income decreases the demand for an inferior good.
• define and explain the difference between substitutes and complementary goods.
• illustrate and explain how the demand for a product increases when the price of a substitute good increases.
• illustrate and explain how the demand for a product increases when the price of a complementary good decreases.
• illustrate and explain how a change in tastes and preferences can increase the demand for a product.
• illustrate and explain how a change in tastes and preferences can decrease the demand for a product.
• illustrate and explain how a change in expectations can increase the demand for a product.
• illustrate and explain how a change in expectations can decrease the demand for a product.
• define and explain the difference between supply and quantity supplied.
• define and explain the law of supply.
• define and explain the difference between a supply schedule and a supply curve.
• draw and explain how a supply curve illustrates the law of supply.
• show how the quantity supplied at a particular price is illustrated by the horizontal distance between the vertical axis and the supply curve.
• list and explain things that cause a supply curve to shift to the right.
• list and explain things that cause a supply curve to shift to the left.
• illustrate and explain how an increase in the number of producers increases the supply of a product.
• illustrate and explain how an increase in inputs costs (i.e., the costs of production) decreases the supply of a product.
• illustrate and explain how a technological innovation increases the supply of a product.
• illustrate and explain how a change in weather can decrease the supply of a product.
• illustrate and explain how a change in weather can increase the supply of a product.
• illustrate and explain how a change in expectations can increase the supply of a product.
• illustrate and explain how a change in expectations can decrease the supply of a product.
• explain the meaning of the Latin phrase “ceteris paribus.”
• define and explain the difference between an equilibrium price and a market price.
• determine the equilibrium price and quantity from a table of prices and the related quantity supplied and quantity demanded.
• determine the equilibrium price and quantity from a graph of a supply curve and a demand curve.
• define and explain the difference between a surplus and a shortage.
• explain why a surplus occurs when the market price is above the equilibrium price.
• explain why a shortage occurs when the market price is below the equilibrium price.
• determine whether there is a surplus or shortage in a market from a table of prices and the related quantity supplied and quantity demanded.
• determine whether there is a surplus or shortage in a market from a graph of a supply curve and a demand curve.
• determine the size of a surplus or shortage in a market from a table of prices and the related quantity supplied and quantity demanded.
• determine the size of a surplus or shortage in a market from a graph of a supply curve and a demand curve.
• explain why a surplus at the current market price has a tendency to cause the market price to go down.
• explain why a shortage at the current market price has a tendency to cause the market price to go up.
• define price controls and explain their purpose.
• define a price floor and explain its purpose.
• define a price ceiling and explain its purpose.
• define minimum wage laws and explain their objective.
• explain how minimum wage laws are examples of a price floor.
• explain the criticisms of minimum wage laws.
• discuss alternative policies that could be used instead of minimum wages and explain why they would be better or worse than the minimum wage.
• define rent controls and explain their objective.
• explain how rent controls are examples of a price ceiling.
• explain the criticisms of rent controls.
• discuss alternative policies that could be used instead of rent controls and explain why they would be better or worse than rent controls.
• define farm price supports and explain their objective.
• explain how farm price supports are examples of a price floor.
• explain the criticisms of farm price supports.
• discuss alternative policies that could be used instead of farm price supports and explain why they would be better or worse than farm price supports.
• use supply and demand analysis to illustrate and explain price changes reported in the news.