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31 Cards in this Set
- Front
- Back
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The condition in which the quantity supplied of a good is greater than the quantity demanded.
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Surplus (see slide 13)
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Do surpluses cause price to go up or down?
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Down (See slide 13)
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The stock of goods that a business or store has on hand.
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Inventory
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What are the consequences for sellers who cannot sell excess inventory?
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1. Loss of perishable goods
2. Storage costs 3. Interest paid on loans accumulates 4. Work slowdown/stoppage, layoffs 5.Demand for the product drops more (fads) |
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What options do producers have during a surplus situation?
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1. Lower Prices
2. Produce less 3. Do both at the same time |
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Minumum amount of production needed to be able to pay all of your expenses.
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Breakeven point
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Costs that remain constant from month to month.
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Fixed Costs
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Costs that fluctuate with the quantity of a product produced.
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Variable Costs
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The condition in which the quantity demanded of a good is greater than the quantity supplied.
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Shortage
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Shortages send what kind of signal to sellers regarding price?
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To raise prices
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Increasing prices send what kind of signal to producers?
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To produce more
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All markets eventually move toward ____________.
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Equilibrium
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What causes equilibrium price to change?
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Changes in either supply or demand or both at the same time
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In a market, the point at which the quantity demanded of a good equals the quantity supplied of that good
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Equilibrium (see slide 12)
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The quantity of a good that is bought and sold in a market that is in equilibrium
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Equilibrium Quantity
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The price of a good that is bought and sold in a market that is in equilibrium
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Equilibrium price
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What effect does an increase in supply have on equilibrium price?
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Equilibrium price falls (see slide 15)
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What effect does a decrease in supply have on equilibrium price?
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Equilibrium price rises (see slide 15)
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What effect does an increase in demand have on equilibrium price?
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Equilibrium price rises (see slide 14)
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What effect does a decrease in demand have on equilibrium price?
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Equilibrium price falls (see slide 14)
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When supply and demand change at the same time, what happens to equilibrium price when demand increases more that supply?
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Equilibrium price rises (see slides 16 and 17)
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When supply and demand change at the same time, what happens to equilibrium price when supply increases more than demand?
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Equilibrium price falls
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Price is a __________ to producers to produce more.
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Signal or communicator
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Who sets the price on goods and services in a free market economy?
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Buyers (by their demand for a good or service)
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A tool used by governments that prevent markets from reaching equilibrium by setting prices for certain goods and services.
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Price Controls
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A legislated price that is below the equilibrium price
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Price Ceiling
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A legislated price that is abve the equilibrium price
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Price Floor
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Do price ceilings create a surplus or shortage of goods?
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A shortage: because sellers do not want to produce as many goods at the lower price (see slide 23)
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Do price floors create a surplus or shortage of goods?
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A surplus: because sellers want to produce more goods at the higher price (see slide 23)
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What is the law of "One Price"?
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When there is a shortage of goods in a particular area and prices rise, producers will ship and sell more goods to that area at the higher price until prices eventually come back down and producers will then supply all markets at the same going rate and the price for that product will be the same in all markets (exclusive of shipping costs)
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What is the effect on the price of a product when suppliers can shift supply from one market to another?
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Prices for that product will tend to be uniform (the same) in all markets.
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