Reading Guide

Chapter and sections in Taylor to Read Pg # Comments/Assignment
4 Demand and Supply

61

Demand, Supply, and Equilibrium in Markets for Goods and Services 62 Read – Important

Demand for Goods and Services 62
Supply of Goods and Services 63
Equilibrium: Where Demand and Supply Cross 65
Shifts in Demand and Supply for Goods and Services 66

The Ceteris Paribus Assumption 67
An Example of a Shifting Demand Curve 67
Factors That Shift Demand Curves 68
Summing Up Factors That Change Demand 69
An Example of a Shift in a Supply Curve 69
Factors That Shift Supply Curves 71
Summing Up Factors That Change Supply 72
Shifts in Equilibrium Price and Quantity: The Four-Step Process 73 Read – examples of suppy & demand analysis; pay particular attention to the method; be sure you can do it

Good Weather for Salmon Fishing 73
Seal Hunting and New Drugs 74
The Interconnections and Speed of Adjustment in Real Markets 77
Price Ceilings and Price Floors in Markets for Goods and Services 77 Read – Important

Price Ceilings 77
Price Floors 79
Responses to Price Controls: Many Margins for Action 80
Policy Alternatives to Price Ceilings and Price Floors 82
Supply, Demand, and Efficiency 83 Read

Consumer Surplus, Producer Surplus, Social Surplus 83
Inefficiency of Price Floors and Price Ceilings 84
Demand and Supply as a Social Adjustment Mechanism 86
Key Concepts and Summary 86
Review Questions 88
5 Labor and Financial Capital Markets

89 Read – application of supply & demand analysis to non-product markets

Demand and Supply at Work in Labor Markets
89

Equilibrium in the Labor Market 90
Shifts in Labor Demand 91
Shifts in Labor Supply 92
Technology and Wage Inequality: The Four-Step Process 92
Price Floors in the Labor Market: Living Wages and Minimum Wages 94
The Minimum Wage as an Example of a Price Floor 95
Demand and Supply in Financial Capital Markets
96

Who Demands and Who Supplies in Financial Capital Markets 97
Equilibrium in Financial Capital Markets 97
Shifts in Demand and Supply in Financial Capital Markets 98
The United States as a Global Borrower: The Four-Step Process 99
Price Ceilings in Financial Capital Markets: Usury Laws 100
Don’t Kill the Price Messengers 102 Read Important
Key Concepts and Summary 103
Review Questions 104 optional