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15 Cards in this Set

  • Front
  • Back
  • 3rd side (hint)
What is Equilibrium?
The point at which quantity demanded and quantity supplied are equal.
A balancing point between price & quantity.
What is Disequilibrium?
Describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market.
Can produce one of two outcomes, excess demand or excess supply.
What is Excess Demand?
When quantity demanded is more than quantity supplied.
Occurs when actual price in a market is below equilibrium price due to low price encouraging buyers & discouraging sellers
What is Excess Supply?
When quantity supplied is more than quantity demanded.
Causes sellers to waste their resources when goods cannot be stored for long.
What is a Price Ceiling?
A maximum price that can be legally charged for a good or service. Ex. is rent control or fuel control to prevent inflation & price gouging
Government may place this on goods considered "essential" & might become too expensive for some consumers.
What is a Price Floor?
A minimum price for a good or service. Ex. Minimum Wage
Price supports in agriculture set minimum prices on some commodities. Ex. Gov. buying up excess crops from farmers.
What is Rent Control?
A price ceiling placed on rent.
Used to prevent rent inflation during housing crisis before & after WWII
What is Minimum Wage?
A minimum price that an employer can pay a worker for an hour of labor.
Must be above equilibrium rate, or it will have no effect because employees would have to pay at least eqilibrium rate anyway to find workers in a free market.
What is Surplus?
A situation in which quantity supplied is greater
than quantity demanded at a given price; also called Excess Supply.
Corrected by letting price fall to point where quantity supplied and quantity demanded are equal, encouraging sales.
What is Shortage?
A situation in which quantity demanded is greater than quantity supplied; also called Excess Demand.
Appears in form of Search Costs (i.e., opportunity & financial costs consumers pay to search for a good/service.
What is Supply Shock?
A sudden shortage of a good.
Creats problem of excess demand when suppliers cannot meet needs of consumers.
What is Rationing?
A system of allocating scarce goods and services using criteria other than price.
The basis of Central Planning not a Free Market economy. Expensive & hard to organize.
What is the Black Market?
A market in which goods are sold illegally.
When people conduct business w/o regard for government controls on price/quantity.
What are Spillover Costs?
Costs of production that affect people who have no control over how much of a good is produced.
Negative externalities including cost of production (ex. air/water pollution) that spill over onto people having no control over product production
What are Search Costs?
The fiancial and opportunity costs consumers pay when searching for a good/service.
Ex. Driving to different stores or calling different towns vs. use of Internet Shopping on computer.