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Name: ____________________________________________________ Date: ____________________

CHAPTER 6, SECTION 1
Outlining Activity
Look through the chapter for an overview of the material. Pay attention to the main topics in the
book. As you scan each section of the book, fill in the missing words in the following outline.
I. Moving to Equilibrium
equilibrium
A. At equilibrium, the quantity of a good that is bought and sold is the ______________________
equilibrium
quantity and the price at which the good is bought and sold is the ______________________
price.
falls
B. Price ______________________
when a surplus exists.
beyond
1. With a surplus, suppliers will have inventories ______________________
the level they
normally hold.
lower
2. Some sellers will ______________________
prices to reduce inventories; some will cut back
on producing output; others will do a little of both.
equilibrium
3. Price and output tend to fall until ______________________
is reached.
rises
C. Price ______________________
when a shortage exists.
1. With a shortage, buyers will not be able to buy all they had hoped to buy.
higher
2. Some buyers will offer to pay a(n) ______________________
price to get sellers to sell to
them instead of to other buyers.
more
3. The higher prices motivate suppliers to start producing ______________________
output.
equilibrium
4. Price and output tend to rise until ______________________
is reached.
II. What Causes Equilibrium Prices to Change?
A. Demand increases (and supply stays the same).
right
1. An increase in demand shifts the demand curve to the ______________________.
greater
2. Initially, quantity demanded is ______________________
than quantity supplied, so a
shortage exists.
rise
3. Price begins to ______________________
until the market is in equilibrium again.
4. Conclusion: An increase in the demand for a good will increase price, all other things
remaining the same.

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Guided Reading and Study Guide

81

B. Demand decreases (and supply stays the same).


left
1. A decrease in demand shifts the demand curve to the ______________________.
less
2. Initially, quantity demanded is ______________________
than quantity supplied, so a
surplus exists.
fall
equilibrium
3. Price begins to ______________________
until the market is in ______________________
again.
4. Conclusion: A decrease in the demand for a good will decrease price, all other things
remaining the same.
C. Supply increases (and demand stays the same).
right
1. An increase in supply shifts the supply curve to the ______________________.
greater
2. Initially, quantity supplied is ______________________
than quantity demanded, so a
surplus exists.
equilibrium
fall
3. Price begins to ______________________
until the market is in ______________________
again.
4. Conclusion: An increase in the supply of a good will decrease price, all other things
remaining the same.
D. Supply decreases (and demand stays the same).
left
1. A decrease in supply shifts the supply curve to the ______________________.
less
2. Initially, quantity supplied is ______________________
than quantity demanded, so a
shortage exists.
rise
3. Price begins to ______________________
until the market is in equilibrium again.
4. Conclusion: A decrease in the supply of a good will increase price, all other things remaining
the same.
III. Changes in Supply and in Demand at the Same Time
price
A. The change in equilibrium ______________________
will be determined by which changes
more, supply or demand.
supply
demand
B. If ______________________
increases more than ______________________,
the equilibrium
price goes up.
demand
supply
C. If ______________________
increases more than ______________________,
the equilibrium
price goes down.

82

CHAPTER 6, SECTION 1

Guided Reading and Study Guide

EMC Publishing

IV. Does It Matter if Price Is at Its Equilibrium Level?


shortages
A. When all markets are in equilibrium, there are no ______________________
or
surpluses
______________________
of any good or service.
shortages
B. When market prices are below equilibrium prices, ______________________
occur. Buyers will
complain that they cant buy some goods they are willing and able to buy.
surpluses
C. When market prices are above equilibrium prices, ______________________
occur. Sellers
complain that they cant sell some goods they are willing and able to sell.
V. Price Is a Signal
A. Price is a signal passed along by buyers to sellers.
B. When demand falls, price goes down and buyers are signaling sellers to produce
less
______________________.
C. When demand rises, price goes up and buyers are signaling to sellers to produce
more
______________________.
VI. What Are Price Controls?
ceiling
A. A price ______________________
is a legislated price that is below the equilibrium price.
floor
B. A price ______________________
is a legislated price that is above the equilibrium price.
VII. Price Controls and the Amount of Exchange
decrease
A. Price controls ______________________the
amount of exchange (trade) that occurs.
B. Price controls limit the opportunities people have to make themselves
better off
______________________.

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Guided Reading and Study Guide

CHAPTER 6, SECTION 1

83

Name: ____________________________________________________ Date: ____________________

CHAPTER 6, SECTION 2
Supply and Demand in Everyday Life
Each of the graphs in questions 19 shows supply and demand for the good named in the title of
the graph. Then the event described occurs. On the graph, illustrate the shift in the supply curve
or the demand curve as a result of the event. Then, fill in the blanks to indicate how equilibrium
price and equilibrium quantity change as a result of the event.
2. Event: A high protein diet fad sweeps the nation.

1. Event: The price of snow skis goes up.


The equilibrium price of ski boots goes
down
______________________
and the

The equilibrium price of hamburger goes


up
______________________
and the

equilibrium quantity of ski boots goes


down
______________________.

equilibrium quantity of hamburger goes


up
______________________.

Price

Price

D
0

Quantity

D
0

Supply and Demand for Ski Boots

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Applying the Principles Workbook

Quantity
Supply and Demand for Hamburger

73

3. Event: New technologies are introduced in the


gadget-manufacturing process.
The equilibrium price of gadgets goes
down
______________________
and the

4. Event: The U.S. government imposes a quota to


protect the domestic steel industry.
The equilibrium price of American-made cars
up
goes ______________________
and the
equilibrium quantity of American-made cars
down
goes ______________________.

equilibrium quantity of gadgets goes


up
______________________.

Price

Price

D
0

D
0

Quantity
Supply and Demand for Gadgets

Quantity
Supply and Demand for American-Made Cars

6. Event: Petroleum refineries are put out of


commission due to a hurricane.
The equilibrium price of gasoline goes
up
______________________
and the

5. Event: The price of DVD players drops.


The equilibrium price of VHS tapes goes
down
______________________
and the
equilibrium quantity of VHS tapes goes
down
______________________.

equilibrium quantity of gasoline goes


down
______________________.

Price

Price

D
0

Quantity
Supply and Demand for VHS Tapes

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CHAPTER 6, SECTION 2

D
0

Quantity
Supply and Demand for Gasoline

Applying the Principles Workbook

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7. Event: The government increases the amount of


the corn subsidy paid to farmers.
The equilibrium price of corn goes
down
______________________
and the

8. Event: Consumers expect the price of gasoline


to increase tomorrow.
The equilibrium price of gasoline goes
up
______________________
and the
equilibrium quantity of gasoline goes
up
______________________.

equilibrium quantity of corn goes


up
______________________.

Price

Price

D
0

D
0

Quantity
Supply and Demand for Corn

Quantity
Supply and Demand for Gasoline

9. Event: Coffee prices increase.


The equilibrium price of tea goes
up
______________________
and the
equilibrium quantity of tea goes
up
______________________.

Price

D
0

Quantity

Supply and Demand for Tea As Replacement for Coffee

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Applying the Principles Workbook

CHAPTER 6, SECTION 2

75

The following graph shows the market for the


reunion tour of a famous 1980s rock band.
Use the graph to answer questions 1015.

$120

$110
$100
$90
Price (per seat)

$80
$70
$60
$50
$40
$30
$20
$10
0

D
5

10

15 20 25 30 35 40 45 50 55 60
Quantity (thousands of seats)

Ticket Price for Famous 1980s Rock Band Concert

$80
10. The equilibrium price is ______.
25,000
11. The equilibrium quantity is ______________________
tickets.
12. Why is the supply curve vertical?
There are only 25,000 seats, so only 25,000 tickets are available. Supply cannot be increased.

surplus
13. If concert organizers decide to charge $100 per ticket, the result will be a ______________________
10,000
of ______________________
tickets.
shortage
14. If concert organizers decide to charge $60 per ticket, the result will be a ______________________
of
10,000
______________________
tickets.
$80
15. Ticket scalpers will exist only if tickets are priced below ______.

76

CHAPTER 6, SECTION 2

Applying the Principles Workbook

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