Supply and Demand
Supply Means
What producers are willing to sell at different prices
What is a surplus?
When supply is greater than demand at a given price
What is a monopoly?
One company controls the entire market for a product
What is a price ceiling?
A maximum price set by the government (ex: rent control)
If gas prices rise after a natural disaster, is this an example of shortage or surplus?
Shortage
Demand means:
What consumers are willing and able to buy at different prices
What is a shortage?
When demand is greater than supply at a given price
What is an oligopoly?
A few large firms dominate a market (ex: Coke & Pepsi in soft drinks)
What is a price floor?
A minimum price set by the government (ex: minimum wage)
Apple releases a new iPhone. At first, demand is much higher than supply. What happens to price?
Price rises / products sell out quickly
hat happens to the price of a product if supply increases but demand stays the same?
Price goes down
Give a real-world example of a shortage.
Toilet paper during COVID-19, or PS5 consoles when first released
What is perfect competition?
Many sellers offering identical products, like farmers selling corn
Which causes a shortage: price ceiling or price floor?
Price ceiling
A farmer grows corn but can’t sell it all before it goes bad. What economic condition is this?
Surplus
When demand increases and supply stays the same, what happens to equilibrium price?
It goes up
Give a real-world example of a surplus.
Farmers having too many crops that don’t sell; unsold seasonal clothes in stores
What is monopolistic competition?
One seller taking control over a market.
Which causes a surplus: price ceiling or price floor?
Price floor
Why do companies like Nike or Adidas charge more for their shoes even though other brands exist?
They use brand differentiation (monopolistic competition).
Explain how supply and demand work together to set prices.
Prices rise when demand is high and supply is low, and fall when supply is high and demand is low; equilibrium is where they meet.
Why do shortages cause prices to rise and surpluses cause prices to fall?
Scarcity makes people compete and pay more; oversupply forces sellers to lower prices to attract buyers.
Name a monopolistic market?
Disney,Google
Explain why governments use price controls.
o protect consumers (keep goods affordable) or protect workers/producers (ensure fair wages/income).
During the COVID-19 pandemic, the government gave stimulus checks to families and businesses. How might this have affected supply, demand, and prices in the economy?
Stimulus checks increased demand because people had more money to spend. If supply couldn’t keep up (due to factory shutdowns or shipping delays), this caused shortages and led to higher prices (inflation).