I    SUPPLY AND DEMAND.

     A.   Supply.

           1.   Derive a supply schedule from a set of production possibilities. 

           2.   Note the efficiency obtained in market. 

                a.  Productive efficiency.

                b.   Note the role of self interest.

           3.   Note the difference between a shift in the supply curve and a movement along the supply curve.

            4.   Shifters of supply.

                a.   Factor cost.

                b.   Technology.

                c.   Expectations of future prices.

                d.   Number of sellers.

      B.   Demand.

           1.  Define the law of demand.

           2.  Differentiate between a movement along the curve and a movement of the curve.

            3.  Shifters of demand.

                a.  Taste and preference.

                b.  Income and wealth.

                     1)normal

                     2)normal and essential

                     3)inferior

                     4)luxury

                c.  Prices of related goods.

                     1)complements

                     2)substitutes

                d.  Expectations about future prices, income and

                     availability.

                e.   Population of buyers.         

     C.   Equilibrium price.

           1.  Define market equilibrium.

            2.  Recognize the forces pushing towards equilibrium.

            3.  Examine the allocatory function of price.

                 a.  what prices tell consumers.

                b.  what prices tell producers.

            4.   Forecast price and quantity changes using supply and demand graphs.

     D.   Economic Efficiency and The Market System

            1.   Note the conditions for efficient market outcomes.

                a.   competition.

                b.   all social costs and benefits are  incorporated in decision making.

                c.   Stability in the economy.

            2.   Resource allocation and the Market System.

     E.   Note what happens when non-market forces try to alter market equilibrium.

         1.               Price ceilings.

        2.               Price floors.

     F.  Price elasticity.

          1.   Define the general concepts of price elasticity and be able to calculate the value of E.

                a.  Elastic (E>1)

                b.   Inelastic (E<1)

                c.   Unitary Elastic  (E=1)

          2.   Identify the major factors that influence the elasticity of demand,

                a.   Available perceived substitutes.

                b.   Percentage of income (relative price).

                c.   Time.

        3.   Note the relationship between elasticity and total revenue.

        4.   Note how elasticity influences the tax incidence.

                 a.   More elastic demand the less the tax is passed along to the consumer.

                 b.   More elastic supply is the more of a tax is shouldered by the consumer.

       5.   Note the other types of elasticity.

                 a.   Income elasticity.

                b.   Cross elasticity.