Name: Date:

Chapter 6, Section 1 Outlining Activity Look through the chapter for an overview of the material. Pay attention to the main topics in the book. As you scan each section of the book, fill in the missing words in the following outline. I. Moving to Equilibrium A. When the quantity supplied is greater than the quantity demanded, a surplus exists. B. When the quantity supplied is less than the quantity demanded, a __________________ exists. C. At equilibrium, the quantity of a good that is bought and sold is the __________________ quantity and the price at which the good is bought and sold is the __________________ price. D. Price __________________ when a surplus exists. 1. With a surplus, suppliers will have inventories
__________________ the level they normally hold. 2. Some sellers will __________________ prices to reduce inventories; some will cut back on producing output; others will do a little of both. 3. Price and output tend to fall until __________________ is reached. E. Price __________________ when a shortage exists. 1. With a shortage, buyers will not be able to buy all they had hoped to buy. 2. Some buyers will offer to pay a(n) __________________ price to get sellers to sell to them instead of to other buyers. 3. The higher prices motivate suppliers to start producing __________________ output. 4. Price and output tend to rise until __________________ is reached. II. What Causes Equilibrium Prices to Change? A.
Demand increases (and supply stays the same). 1. An increase in demand shifts the demand curve to the __________________. 2. Initially, quantity demanded is ______________ than quantity supplied, so a shortage exists. 3. Price begins to __________________ until the market is in equilibrium again. 4. Conclusion: An increase in the demand for a good will increase price, all other things remaining the same.

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B. Demand decreases (and supply stays the same). 1. A decrease in demand shifts the demand curve to the ______________________. 2. Initially, quantity demanded is ______________________ than quantity supplied, so a surplus exists. 3. Price begins to ______________________ until the market is in ______________________ again. 4. Conclusion: A decrease in the demand for a good will decrease price, all other things remaining the same. C. Supply increases (and demand stays the same). 1. An increase in supply shifts the supply curve to the ______________________. 2. Initially, quantity supplied is ______________________ than quantity demanded, so a surplus exists. 3. Price begins to ______________________
until the market is in ______________________ again. 4. Conclusion: An increase in the supply of a good will decrease price, all other things remaining the same. D. Supply decreases (and demand stays the same). 1. A decrease in supply shifts the supply curve to the ______________________. 2. Initially, quantity supplied is ______________________ than quantity demanded, so a shortage exists. 3. Price begins to ______________________ until the market is in equilibrium again. 4. Conclusion: A decrease in the supply of a good will increase price, all other things remaining the same. III. Changes in Supply and in Demand at the Same Time A. The change in equilibrium ______________________ will be determined by
which changes more, supply or demand. B. If ______________________ increases more than ______________________, the equilibrium price goes up. C. If ______________________ increases more than ______________________, the equilibrium price goes down.

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IV. Does It Matter if Price Is at Its Equilibrium Level? A. When all markets are in equilibrium, there are no ______________________ or ______________________ of any good or service. B. When market prices are below equilibrium prices, ______________________ occur. Buyers will complain that they can’t buy some goods they are willing and able to buy. C. When market prices are above equilibrium prices, ______________________ occur. Sellers complain that they can’t sell some goods they are willing and able to sell. V. Price Is a Signal A. Price is a signal passed along by buyers to sellers. B. When demand falls, price goes down and buyers are signaling sellers to produce ______________________. C. When
demand rises, price goes up and buyers are signaling to sellers to produce ______________________. VI. What Are Price Controls? A. A price ______________________ is a legislated price that is below the equilibrium price. B. A price ______________________ is a legislated price that is above the equilibrium price. VII. Price Controls and the Amount of Exchange A. Price controls decrease the amount of exchange (trade) that occurs. B. Price controls limit the opportunities people have to make themselves ______________________. VIII. Price and Speculators A. Speculators do things they hope will earn them profits (such as buying and selling specific goods). B. Speculators reduce the variability in prices from one year to
the next by reallocating supply between years.

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