<p> Chapter 7 Demand and Supply Section 1 1. ______influence the price of goods in a market economy.</p><p>2. Define demand.</p><p>3. Define supply.</p><p>4. What act shows that a buyer agrees to the price of a product?</p><p>5. What are the 2 conditions of the law of demand? 1.</p><p>2.</p><p>6. People are limited by their ______as to what they can purchase.</p><p>7. What is the substitution effect?</p><p>8. Describe diminishing marginal utility.</p><p>Discussion Questions Suppose that the buyer does not agree to the product and price. Other than change the price, how can the seller convince the buyer to agree to the price?</p><p>What are some reasons that people substitute one product for another? What are some reasons that people continue to buy a product despite its price?</p><p>Section 2 9. What is a demand schedule?</p><p>10. A change in quantity demanded is caused by a change in ______.</p><p>11. What causes a shift in the demand curve? 12. What are the 5 determinants of Demand? 1. 2. 3. 4. 5.</p><p>13. Define elasticity.</p><p>14. What is the difference between elastic and inelastic demand?</p><p>15. What 3 things determine price elasticity of demand? 1.</p><p>2.</p><p>3.</p><p>Discussion Questions Why do you think graphing the demand curve would be useful to businesses?</p><p>Section 3 16. What are the 2 conditions of the law of supply? 1.</p><p>2.</p><p>17. A ______relationship exists between price and quantity supplied.</p><p>18. What effects do high prices have on the market?</p><p>19. A change in quantity supplied is caused by a change in ______.</p><p>20. What are the 4 determinants of supply? 1. 2. 3. 4.</p><p>21. Explain the Law of Diminishing Returns. Discussion Questions Why do higher prices encourage more competitors to enter an industry? Explain your answer in terms of risk and profit.</p><p>Section 4 22. In the real world, ______and ______work together.</p><p>23. What is equilibrium price?</p><p>24. How do shifts in the demand or supply curve affect equilibrium price?</p><p>25. Rising prices signal producers to make ______and consumers to purchase ______.</p><p>26. Falling prices signal producers to make ______and consumers to purchase ______.</p><p>27. What are the 3 types of signals for changes in price? 1. 2. 3.</p><p>28. Why might the government institute a price control?</p><p>29. Define price ceiling.</p><p>30. Shortages can lead to a ______, or illegal places to purchase such products at exorbitant prices.</p><p>31. Define price floor.</p><p>32. What are 2 examples of the use of price floors? 1.</p><p>2.</p><p>Discussion Questions Think of a situation in which it is important that the government prevent market forces from dealing with shortages and surpluses.</p>