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Guided Reading 6-1
Guided Reading 6-1
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.