Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.
Understanding
- I can define a shortage and a surplus and say whether each occurs above or below the equilibrium price. (Guide: “Shortages and surpluses”; Practice Q1)
- I can explain how a shortage or surplus pushes the price back to equilibrium, with both quantities moving along their curves. (Guide: “How market forces restore equilibrium”; Practice Q5(c))
- I can explain why a shortage is not the same as scarcity, and why a shortage does not last in a free competitive market. (Guide: “Common misconceptions”; Practice Q6(c))
- I can state the effect of each single shift of demand or supply on equilibrium price and quantity. (Guide: “Changes in equilibrium: four single shifts”)
Calculation and graphing
- I can calculate the size of a shortage or surplus from a table or from demand and supply equations. (Guide: Worked example 1; Practice Q1, Q4(a))
- I can find a new equilibrium after a shift by setting the new Qd equal to Qs. (Guide: Worked example 2; Practice Q4, Q7)
- I can calculate the change in consumer, producer and total surplus after a shift, using the curves that apply after the change. (Guide: Worked example 2; Practice Q4(c), Q7(c))
- I can identify the quantity traded at a disequilibrium price and calculate the surplus lost. (Guide: “Surplus lost while the market is out of equilibrium”; Practice Q5(b))
- I can draw a labelled graph showing a surplus or shortage at a given price, and a shift with the old and new equilibria. (Guide: Figures 1 and 2; Practice Q5(a))
Reasoning
- I can explain the full chain from an event to a new equilibrium: shift, shortage or surplus at the old price, price change, movement along the other curve. (Guide: Worked example 2(c); Practice Q4(a))
- I can say which variable is indeterminate when both curves shift, and what decides its direction. (Guide: “When both curves shift”; Practice Q2, Q6)
- I can explain how the elasticity of the curve that does not shift affects the size of the price and quantity changes, and who bears the loss. (Guide: “Elasticity decides the size of the change”; Practice Q3, Q7)
All ticked? Move on to Topic 2.8, The Effects of Government Intervention in Markets, or return to the course roadmap.