Supply and demand is the foundation of the market economy and the basis of the study of economics.
- Why supply and demand is considered as factors that make market economies work? Why supply and demand drives the market economy? Provide an example of the role of supply and demand in business decision making.
- What is the difference between a movement along and a shift of the demand and supply curves? What are the factors that lead to shifts in supply and demand curves?
Without government intervention, the market price moves to the level at which the quantity supplied equals the quantity demanded through the interactions of supply and demand. But governments intervene in the market now and then to control prices.
- What are the market inefficiencies the price controls measures such as price ceilings and price floors create? Why do price ceilings and price floors lead to productive and allocative (marketing) inefficiency?
- Who benefits and who loses from government interventions in markets through price control methods known as price ceilings and price floors? Why price controls are used despite their well-known problems?