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Name:_________________________ Hour:_________________________ CHAPTERS 5 & 6 STUDY GUIDE (For this study guide, and for this class, we will only be working on Section 1 of Chapter 5, as well as all sections of Chapter 6.) What is the Law of Supply? What does it mean in plain English? Sketch the supply curve for the McGrath’s Greebe Factory and Candy Warehouse’s supply schedule of Greebes. (Remember, a Greebe is a vomiting teddy bear. This is very important.) Price 50 40 30 20 10 Quantity Supplied 10 8 6 4 2 What is the difference between a change in quantity supplied and a shift in the supply curve? There are seven factors that can cause a change in supply. List them, and the manner in which they influence the supply curve. • • • • • • • What is meant by the term “supply elasticity”? Name a product that has an elastic supply curve: Name a product that has an inelastic supply curve: For each of the following examples, circle whether the action would cause a shift in the supply curve or a change in the quantity supplied in the production of Greebes. • The federal government raises minimum wage for all employees. Shift in Supply • Wal-Mart runs a huge sale on Greebes. Shift in Supply • Change in Quantity Supplied The Surgeon General holds a press conference announcing stricter regulations on the production of toys that vomit. Shift in Supply • Change in Quantity Supplied Change in Quantity Supplied Thanks to technological advances in the production of fake vomit, productivity at McGrath’s Greebe Factory & Candy Warehouse rises 47%. Shift in Supply What is price? How is it determined? Change in Quantity Supplied What are the advantages of prices? Name and explain the three problems of allocations without prices. • • • How did the price system lead to changes in automobile production in the 1970s? Graph the supply and demand schedules for Greebe’s on the chart below. Price 50 40 30 20 10 Quantity Supplied 10 8 6 4 2 Quantity Demanded 1 3 5 7 9 What does “equilibrium” mean? What is the equilibrium price and quantity for Greebes on the chart above? What is the difference between a surplus and a shortage? If the market for a particular good is in equilibrium, is there a shortage or a surplus of that good? What is the competitive price theory? How can buyers use it their advantage? How do sellers use it to their advantage? Explain the concept of a price ceiling. Why would price ceilings exist? What are some examples of products that have price ceilings? Explain the concept of a price floor. Why would price floors exist? What are some examples of products that have price ceilings? Read the section on agricultural price supports (Pgs 153-155). What is your opinion on agricultural price supports? Are you for them or against them? Why? Why do you think these price supports still exist?