1.Explain what happens to demand when each of the following happens :

a.Number of buyers increases

b.Price of a substitute decreases

c.Wealth of consumers decrease

2.Explain what happens to supply when each of the following happens:

a.number of suppliers increase

b.resource prices increase

c.business taxes increased.

3.What does the Law of Demand say about buyers? Why is this true? Be sure to discuss the income and substitution effects.

4.Give a definition of each and your own example: 1. Normal good 2. Inferior good 3. Substitute goods 4. Complementary goods.

5.What is the relationship between quantity demanded and quantity supplied when at equilibrium? What is the relationship when there is a shortage? What is the relationship when there is a surplus?

6.If the price is below the equilibrium level, would you predict a surplus or a shortage? Why?

7.When the price is below the equilibrium, explain how market forces move the market price to equilibrium.

8.Explain the difference between the demand and the quantity demanded of a product by using the example of milk .

9.Does a price ceiling attempt to make a price higher or lower? How does a price ceiling set below the equilibrium level affect quantity demanded and quantity supplied?

10. A low-income country decides to set a price floor for farmers so it can make sure that their crops will provide an adequate income The conditions of demand and supply are given in the table below. What are the equilibrium price and equilibrium quantity before the price floor? What will the surplus be if the price ceiling is set at $3.20? At $3.60?

Price Qd Qs

1.60 9,000 5,000

2.00 8,500 5,500

2.40 8,000 6,400

2.80 7,500 7,500

3.20 7,000 9,000

3.60 6,500 11,000

4.00 6,000 15,000