1. Competitive markets clear and what the buyers want to buy.
2. The difference between shortages and surpluses and how the markets
compete to eliminate them. (Invisible Hand in the Market)
3. Prices send signals to buyers and sellers.
4. Market-clearing and the way prices ration goods and services.
5. Prices motivate people to produce goods and services.
6. Prices motivate producers to make goods that buyers want.
7. Changes in demand and supply bring about changes in the market.
STUDENT OUTLINE
I Demand and Supply Together
A. Market Clearing Prices (study the graph on p. 63)
B. Market Shortages
C. Market Surpluses
D. Effect of Scarcity,
II The function of prices in a market.
A. Prices send signals.
B. Rationing.
C. Prices Motivate
III Changes in Price and Production
A. Prices can "clear" or "glut" the market.
B. Shifts in Demand can affect the Prices in the Market
Do the homework in the study guide and turn it in on the test day.