Now that you have finished reading this chapter, you should read it again. Really. Understanding supply and demand is critical to understanding economics, and in this chapter we have covered the most important aspects of the supply and demand model, namely how supply and demand together determine equilibrium price and quantity. You should understand, among other ideas, the following:
Market competition brings about an equilibrium in which the quantity supplied is equal to the quantity demanded.
Only one price/quantity combination is a market equilibrium and you should be able to identify this equilibrium in a diagram.
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You should understand and be able to explain the incentives that enforce the market equilibrium. What happens when the price is above the equilibrium price? Why? What happens when the price is below the equilibrium price? Why?
The sum of consumer and producer surplus (the gains from trade) is maximized at the equilibrium price and quantity, and no other price/quantity combination maximizes consumer plus producer surplus.
You should know from Chapter 3 the major factors that shift demand and supply curves and from this chapter be able to explain and predict the effect of any such shift on the equilibrium price and quantity.
A “change in demand [the demand curve]” is not the same thing as “a change in quantity demanded”; a “change in supply [the supply curve]” is not the same thing as “a change in quantity supplied.”
Most important, you should be able to work with supply and demand to answer questions about the world.