Applications of Supply and Demand

Question 1

Happiness

Answer 1

The state of feeling or showing pleasure or contentment.

Question 2

Consumer Surplus

Answer 2

The difference between the amount consumers are willing to pay for a good (as shown by the demand curve) and the amount that they actually pay when buying it (the market price).

Question 3

Producer Surplus

Answer 3

The amount producers receive for a good (the market price) in excess of the minimum price required to induce them to supply (as shown by the supply curve).

Question 4

Price Ceiling

Answer 4

maximum legal price at which a seller (usually a firm) may sell a good or service.

Question 5

Dead Weight Loss

Answer 5

The net loss in total surplus (foregone gains from trade) brought about by a deviation away from market equilibrium.

Question 6

Price Floor

Answer 6

The minimum legal price at which a seller may sell a good or service.

Question 7

Quota

Answer 7

The maximum legal quantity of a good or service that may be produced in a market (by all firms).

Question 8

Tax

Answer 8

A compulsory contribution to state revenue, levied by the government on each unit of a good or services exchanged.

Question 9

Subsidy

Answer 9

A sum of money granted by the state or a public body toward the purchase price of each unit of a good or service.