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Name and describe in detail at least two assumptions that we talked about which are necessary for a market system to exist. Which do you think is most realistic in contemporary American society and which is least realistic?
What is the purpose of supply and demand model? Which two economic inefficiencies are solved by the supply and demand model?
Draw an increase in demand and give an example of something that can cause an increase in demand. After drawing the change in demand, show the old and new equilibrium price. Lastly, answer what happens to “the quantity supplied” after demand increases.
Draw a decrease in supply. Draw the new and old equilibrium and answer what happens to price and quantity in this market. What is an example of something that can cause supply to decrease? After supply decreases, what happens to the “quantity demanded” after the decrease.