ap macro equilibrium study guide

Law of Demand

consumers buy more of a good when its price decreases and less when its price increases

What causes a demand shift?

change of income

change of attitudes, tastes, and preferences

change in price of a substitute good

change of price of a complementary good

What's the difference between a change in demand and a change in quantity demand?

A change in quantity demanded refers to a movement along a fixed demand curve -- that's caused by a change in price. A change in demand refers to a shift in the demand curve -- that's caused by one of the shifters: income, preferences, changes in the price of related goods and so on.

Law of Supply

producers offer more of a good as its price increases and less as its price falls

What are the differences between Supply and Quantity Supply

supply refers to the curve, and quantity supplied refers to a specific point on the curve.

What causes the supply curve to shift?

technology

prices in resources (cost of inputs)

When there is more quantity demanded than quantity supplied there is a...

shortage
(below equilibrium)

When there is more of a quantity supplied than a quantity demanded there is a...

surplus
(above equilibrium)

price floor

a minimum price for a good or service above equilibrium (minimum wage)

price ceiling

a maximum price that can be legally charged for a good or service below the equilibrium (rent control)