Econ 101 Mi Ch. 4

Front 1

What happens when a price ceiling is below the equilibrium price, and why?

Back 1

When a price ceiling is below the equilibrium price it creates shortages and drives up opportunity costs because less efficient mechanisms prevail when the market cannot adjust. Requires 1) growing enforcement bureacracy, 2) stimulates costly lobbying for "exceptions", 3) creates immense pressures for corruption of officials in charge of enforcement, 4) thwarts expansion of output that would normally follow higher prices, 5) generates black markets because demand exceeds supply

Front 2

Changes in quantity demanded are caused by...

Back 2

changes in supply

Front 3

Changes in quantity supplied are caused by...

Back 3

changes in demand

Front 4

arbitrage

Back 4

risklessly buying at a low price in one market and then selling at a higher price in another market

Front 5

price controls

Back 5

government imposed price ceilings or price floors that hinder the market's ability to ration goods efficiently

Front 6

externalities

Back 6

benefits or costs of an activity spill over to 3rd parties

Front 7

A ticket scalper is an example of a...

Back 7

speculator

Front 8

public goods

Back 8

can be enjoyed by many people simultaneously, but restricting access is prohibitively expensive

Front 9

price floor

Back 9

minimum legal price. causes a surplus

Front 10

price ceiling

Back 10

maximum legal price. causes a shortage

Front 11

Reliability

Back 11

Findings can be replicated
(intrinsic properties of Screening Test ; reliability and validity)

Front 12

Adam Smith's name for automatic market adjustments:

Back 12

invisible hand

Front 13

floors that cause the unskilled to be unemployed

Back 13

minimum wage laws

Front 14

transaction costs

Back 14

emerge because information and mobility are costly

Front 15

If demands increase while supplies decline, prices ________ but quantity changes are ________.

Back 15

rise; indeterminate

Front 16

When there are increases in both demands and supplies, _________ will increase but the change in _________ is indeterminate.

Back 16

quantity; price

Front 17

The economic functions of government include:

Back 17

providing a reasonably certain legal, social, and business environment for stable growth; promoting and maintaining competitive markets; providing public goods and adjusting for externalities; stabilizing income, employment, and the price level