| Chapter 6 Vocabulary | The Role of Prices | Changes in Market Equilibrium | Combining Supply and Demand | 'The' Test |
| 10 | 10 | 10 | 10 | 10 |
| 20 | 20 | 20 | 20 | 20 |
| 30 | 30 | 30 | 30 | 30 |
| 40 | 40 | 40 | 40 | 40 |
| 50 | 50 | 50 | 50 | 50 |
| Final Question | ||||
An occurance when quantity supplied is not equal to quantity demanded.
An occurance when quantity supplied is not equal to quantity demanded.
Disequilibrium
Surplus
Surplus
Excess supply
A minimum price for a good or service.
A minimum price for a good or service.
Price Floor
Excess Demand
Excess Demand
Shortage
A sudden shortage of a good
A sudden shortage of a good
Supply shock
What are the advantages of prices?
What are the advantages of prices?
They provide incentives, are used as signals by consumers and producers, are flexible, free, and diverse.
Although they are a nearly inevitable consequenceof rationing, such trade is illegal and strongly discouraged by governments.
Although they are a nearly inevitable consequenceof rationing, such trade is illegal and strongly discouraged by governments.
The Black Market
What is the alternative to a price-based market? (It is inneficient and difficult to carry out successfully.)
What is the alternative to a price-based market? (It is inneficient and difficult to carry out successfully.)
Rationing
How do prices in the free market lead to efficient resource allocation?
How do prices in the free market lead to efficient resource allocation?
Prices tell producers how much to supply since they are determined in part by consumers. This process leads to efficient allocation of goods because producers will offer goods and services that consumers are willing to purchase.
Suppose that a recent snowstorm has caused a supply shock in the market for suger in the U.S. How would you attempt to solve the problems that follow the storm?
Suppose that a recent snowstorm has caused a supply shock in the market for suger in the U.S. How would you attempt to solve the problems that follow the storm?
a) Voluntary consumer limitation of sugar consumption, rationing, or price hikes by producers
Name at least three things that can shift the supply curve.
Name at least three things that can shift the supply curve.
Cost of inputs, productivity levels, technology, taxes or subsidies, expectations, government regulations
Name at least three things that can shift a demand curve.
Name at least three things that can shift a demand curve.
income effect, consumer expectations, population, consumer tastes and advertising, prices of related goods (subsitution effect and complements)
When it costs producers less to produce an item than before, this will shift the supply curve which direction?
When it costs producers less to produce an item than before, this will shift the supply curve which direction?
To the right --away from the zero
When prices go down, demand goes where?
When prices go down, demand goes where?
Up
When you have a fall in supply, the supply curve shifts to the what? What happens to the price and consumer demand?
When you have a fall in supply, the supply curve shifts to the what? What happens to the price and consumer demand?
left; goes up, goes down
The point on a graph where supply and demand come together is called what?
The point on a graph where supply and demand come together is called what?
Equilibrium
How is excess demand shown on a graph: above or below the equilibrium pount?
How is excess demand shown on a graph: above or below the equilibrium pount?
below
Markets tend toward equilibrium, but in some cases the government steps in to control prices. What are those two ways?
Markets tend toward equilibrium, but in some cases the government steps in to control prices. What are those two ways?
Through price ceilings and price floors
Give an example of a price ceiling.
Give an example of a price ceiling.
Rent control
Give an example of a price floor.
Give an example of a price floor.
Minimum wage
If you have a surplus, what happens to the price?
If you have a surplus, what happens to the price?
Goes down
If you have a surplus, what happens to the demand for a product?
If you have a surplus, what happens to the demand for a product?
Decreases
If you have a surplus, what will happen to the supply of this product?
If you have a surplus, what will happen to the supply of this product?
Decrease
Another name for the equilibrium point.
Another name for the equilibrium point.
Market Clearing Price
What does the law of demand state about the relationship between price and quantity supplied?
What does the law of demand state about the relationship between price and quantity supplied?
If you have a shortage, there is not enough product to go around. In order to decrease demand and earn more profit, producers will raise prices.
How is elasticity of supply measured?
How is elasticity of supply measured?
Time: How quickly suppliers respond to changes in price.
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