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16 Cards in this Set

  • Front
  • Back
  • 3rd side (hint)
What is Equilibrium?
The point at which quantity demanded and quantity supplied are equal.
A stable, balance point between price & quantity.
What is Disequilibrium?
When the market price or quantity supplied is anywhere but at the equilibrium.
This will cause either excess supply or excess demand.
What is Excess Demand?
When quantity demanded is more than quantity supplied.
When the actual price in a market is < equilibrium price
What is Excess Supply?
When quantity supplied exceeds quantity demanded
This causes sellers to waste their raw materials especially when the products cannot be stored for long.
What is a Price Ceiling?
A maximum price that can be legally charged for a good or service.
Ex. Gov. enforced "rent controls" to prevent inflation of housing costs after WWII.
What is a Price Floor?
A minimum price for a good or service. It increases the quantity demanded but decreases quantity supplied.
Ex. Gov. enforced "minimum wage" , results in fewer new apartment buildings or renovations of older ones & some are converted to offices, stores or condos.
What is Rent Control?
A price ceiling placed on rent.
used to curb inflation in housing market
What is Minimum Wage?
A minimum price that an employer can pay a worker for an hour of labor
An example of a Price Floor
What is a Surplus?
A situation in which quantity supplied is greater than quantity demanded, also known as Excess Supply.
Suppliers respond to this by reducing prices.
What is a Shortage?
A situation in which quantity demanded is greater than quantity supplied; i.e., Excess Demand
Caused by fads causing "bidding" on the market for a popular good.
What is a Shortage?
A situation in which quantity demanded is greater than quantity supplied; i.e., Excess Demand.
A gap between quantity supplied & quantity demanded
What are Search Costs?
The financial and opportunity costs consumers pay when searching for a good or service.
Ex. driving to different stores or calling different towns to find a very popular good or service
What is Supply Shock?
A sudden shortage of a good.
Ex. gasoline or wheat; creates a problem of excess demand because suppliers can no longer meet customer needs.
What is Rationing?
A system of allocating scarce goods and services using criteria other than price.
Used in Centrally-Planned economies, is expensive & difficult to organize
What is the Black Market?
A market in which goods are sold illegally.
Allow consumers to pay more so they can buy a good when it is otherwise legally unavailable & discouraged by government.
What are Spillover Costs?
Costs of production that affect people who have no
control over how much of a good is produced
Externalities that include costs of production (air & water pollution) which "spill over" onto people who have no control over how much of a good is produced.