To the right --away from the zero
Market Clearing Price
income effect, consumer expectations, population, consumer tastes and advertising, prices of related goods (subsitution effect and complements)
Rationing
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.
The Black Market
Through price ceilings and price floors
below
Shortage
left; goes up, goes down
Minimum wage
Decreases
Disequilibrium
Goes down
Rent control
Decrease
They provide incentives, are used as signals by consumers and producers, are flexible, free, and diverse.
Excess supply
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.
Equilibrium
Price Floor
Up
Cost of inputs, productivity levels, technology, taxes or subsidies, expectations, government regulations
Supply shock
a) Voluntary consumer limitation of sugar consumption, rationing, or price hikes by producers
The point on a graph where supply and demand come together is called what?
An occurance when quantity supplied is not equal to quantity demanded.
Give an example of a price floor.
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?
When prices go down, demand goes where?
What does the law of demand state about the relationship between price and quantity supplied?
When you have a fall in supply, the supply curve shifts to the what? What happens to the price and consumer demand?
What are the advantages of prices?
Name at least three things that can shift the supply curve.
If you have a surplus, what happens to the demand for a product?
How is excess demand shown on a graph: above or below the equilibrium pount?
A sudden shortage of a good
If you have a surplus, what will happen to the supply of this product?
When it costs producers less to produce an item than before, this will shift the supply curve which direction?
Excess Demand
Give an example of a price ceiling.
Markets tend toward equilibrium, but in some cases the government steps in to control prices. What are those two ways?
Name at least three things that can shift a demand curve.
A minimum price for a good or service.
If you have a surplus, what happens to the price?
Surplus
Another name for the equilibrium point.
How do prices in the free market lead to efficient resource allocation?
Although they are a nearly inevitable consequenceof rationing, such trade is illegal and strongly discouraged by governments.
What is the alternative to a price-based market? (It is inneficient and difficult to carry out successfully.)
