• What are the characteristics of market economies, including free and competitive

markets?
Market: any situation that brings together buyers and sellers of goods or services.
Types of Economies - In the modern world today, there is a range of economic systems:
Market Economy: an economy where economic decisions are decentralized, resources are
owned by private individuals, and businesses supply goods and services based on demand.
Competitive Market: a market in which there is a large number of buyers and sellers, so that no
one can control the market price.
Free Economy: a market in which the government does not intervene in any way.
• What are the characteristics of a planned, or command, economy?
Planned (or Command) Economies: an economy where economic decisions are passed down
from government authority and where resources are owned by the government.
• Resources and businesses are owned by the government. 
• Government decides what goods and services will be produced and what prices will be
charged for them.
• Government decides what methods of production will be used and how much workers
will be paid
• What is demand and the law of demand?
Demand: the relationship between the price of a certain good or service and the quantity of
that good or service someone is willing and able to buy.
Law of Demand: the common relationship that a higher price leads to a lower quantity
demanded of a certain good or service and a lower price leads to a higher quantity demanded,
while all other variables are held constant.
• What is a demand curve?
It ‘s a graphic representation of the relationship between price and quantity demanded of a
certain good or service, with price on the vertical axis and quantity on the horizontal axis.
 How can you create a demand curve using a data set?
• Which factors cause a shift in the demand curve and explain why the shift occurs?
Shift in demand happens when a change in some economic factor (other than price) causes
a different quantity to be demanded at every price.
 • changing tastes or preferences
• changes in the composition of the population
• changes in the prices of related goods
• changes in expectations about future prices
The demand for a product can be affected by changes in the prices of related goods such as
substitutes or complements. 
• Substitutes: goods or services that can be used in place of one another
• Complements: goods or services that are used together because the use of one enhances
the use of the other.
• What are substitutes and complements and give examples?
• Substitutes: goods or services that can be used in place of one another. (coca cola and
pepsi)
• Complements: goods or services that are used together because the use of one enhances
the use of the other. ( sugar and tee) ( cereal and milk)
• How do you draw a demand curve and graphically represent changes in demand?
• What is supply and the law of supply?
Supply: the relationship between the price of a certain good or service and the quantity of
that good or service producers are willing to offer for sale.
Law of Supply: the common relationship that a higher price leads to a higher quantity
supplied of a certain good or service and a lower price leads to a lower quantity supplied, while
all other variables are held constant.
What is a supply curve?
Supply Curve: a graphic representation of the relationship between price and quantity supplied
of a certain good or service, with price on the vertical axis and quantity on the horizontal axis.
How do you create a supply curve using a data set?
Which factors cause a shift in the supply curve and explain why the shift occurs?
A shift in supply means a change in the quantity supplied at every price.
• Production Costs Affect Supply: When costs of production fall, a firm will tend to supply
a larger quantity at any given price for its output. This can be shown by the supply
curve shifting to the right.
• Shift in Supply Due Increased Production Costs a higher cost of production typically
causes a firm to supply a smaller quantity at any given price. In this case, the supply curve
shifts to the left.
• Subsidy: A government payment to firms to encourage production of some good or
service. From a firms perspective it reducing the cost of production.

What are equilibrium price and quantity? Identify them in a market?

price and quantity combination where supply equals demand.
• What are surpluses and shortages? How do they cause the price to move towards
equilibrium?
• Shortage (or excess demand): situation where the quantity demanded in a market is
greater than the quantity supplied; occurs at prices below the equilibrium.
Surplus (or excess supply): situation where the quantity demanded in a market is less
than the quantity supplied; occurs at prices above the equilibrium.
• Generally any time the price for a good is below the equilibrium level, incentives built
into the structure of demand and supply will create pressures for the price to rise. 
• Similarly, any time the price for a good is above the equilibrium level, similar pressures
will generally cause the price to fall.
• How do you create a graph that illustrates equilibrium price and quantity?
• What is the four-step process to predict how economic conditions cause a change in
supply, demand, and equilibrium?
• Step 1: Draw demand and supply curves showing the market before the economic
change took place. 
• Step 2: Decide whether the economic change being analyzed affects demand or supply.
• Step 3: Determine whether the effect on demand or supply causes the curve to shift to
the right or to the left, and sketch the new demand or supply curve on the diagram.
• Step 4: Identify the new equilibrium, and then compare the original equilibrium price
and quantity to the new equilibrium price and quantity.
• What happens to supply, demand, and equilibrium when there is a change in both
supply and demand?
An increase in demand, all other things unchanged, will cause
the equilibrium price to rise; quantity supplied will increase. A decrease
in demand will cause the equilibrium price to fall; quantity supplied will decrease.
An increase in supply, all other things unchanged, will cause the equilibrium price to fall;
quantity demanded will increase A decrease in supply will cause
the equilibrium price to rise; quantity demanded will decrease.
• What are the differences between changes in demand and changes in the quantity
demanded?
n case of change in quantity demanded movement takes place along the
existing demand curve. ... In case of change in demand the
entire demand schedule and demand curve change. With an increase
in demand curve shifts upward and with a decrease in demand curve shifts
downward.
• What are the differences between changes in supply and changes in quantity supplied?
A change in quantity supplied will imply a movement along the supply curve, while
a change in supply refers to a shift in the supply curve. A change in quantity
supplied is usually caused by a change in the unit price while a change in
supply is caused by new methods of production.