AP Economics Chapter 4 Review

I would give this chapter a 1.5/3 difficulty rating. The idea of Supply and demand is not difficult to understand, and plus, I have already learned a bit of this conecpt in my business class two years ago. However, a new idea that came on to me as a bit more difficult (not difficult overall though) was the factors that affected the shift of the Supply-Demand graph

The chapter starts off with the introduction of markets and competition and how it relates to the Supply-Demand system. The price of a good plays a central role in analyzing how markets work, and this relates to the quanity demanded of that good.  Then it shows the "demand curve", a graph of the relationship between the PRICE of a good and the QUANTITY demanded.  It looks more like a straight line though :/

The next few pages tells me about shifting the demand curve. This includes individual factors such as one's: substitues, complements, income, expectations. I've never thought about how I make my buying decisions, but after reading this chapter, I realized that all the factors that they listed applied to me in the real world. Whenver I'm low on money, I have to limit myself to one less chocolate bar a day, or when the hot dog stand is not at the corner of my street on a certain day, I will go and eat some Mcdonalds(Increasing the demand for Mcdonalds).

Note: The demand curve holds constant all other variables (besides for price and quantity), and if those variables change, then the graph will shift.

The law of supply is interesting. It states that quantity is positiviely related to the price of a good. It is based on the idea that firms will produce more goods to sell if their good is more expensive from the equilliberium point on the supply-demand graph.  But just like the demand graph, the supply graph will not shift unless one of its other variables changes.

End note, Equlibrium: The equilibrium point is where the point at the supply and demand curves intersect. This satisfies both the buyers and the suppliers. However, changes in either supply or demand will usually cause the Equilibrium point to shift.