ch 6

Question 0

disequilibrium

Answer 0

any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market

Question 1

equilibrium

Answer 1

the point at which the demand for a product or service is equal to the supply of that product or service

Question 2

shortage

Answer 2

when quantity demanded is more than quantity supplied

Question 3

surplus

Answer 3

when quantity supplied is more than quantity demanded

Question 4

a maximum price that can legally be charged for a good or service

Answer 4

price ceiling

Question 5

a price ceiling placed on apartment rent

Answer 5

rent control

Question 6

a minimum price for a good or service

Answer 6

price floor

Question 7

a minimum price that an employer can pay a worker for one hour of labor

Answer 7

minimum wage

Question 8

the quantity of goods that a firm has on hand

Answer 8

inventory

Question 9

a product that is popular for a short period of time

Answer 9

fad

Question 10

search costs

Answer 10

the financial and opportunity costs that consumers pay when searching for a good or service

Question 11

a sudden shortage of a good

Answer 11

supply shock

Question 12

a system of allocating scarce goods and service using criteria other than price

Answer 12

rationing

Question 13

a market in which goods are sold illegaly, without regard for government controls on price or quantity

Answer 13

black market

Question 14

law of demand

Answer 14

consumers will buy more of a good when its price is lower and less when its price is higher

Question 15

law of supply

Answer 15

producers offer more of a good as its price increases and less as its price falls

Question 16

externality

Answer 16

a n economic side effect of a good or service that generates benefits or costs to someone other than the person deciding hoe much to produce or consume

Question 17

who wrote The Wealth Of Nations in what year?

Answer 17

adam smith

1776

Question 18

briefly explain Adam smith’s major observation about markets

Answer 18

invisible hand - self regulating nature of the market place

Question 19

discus the advantages of price

Answer 19

provides an incentive in form of money
is free no need for bureaucracy
provides information and a language to communicate the information
- a standard measure
- flexible - may be used in nearly all situations
-consistent and accurate
- a common language to all users
- communicates clearly on information, is not vague or ambitious
- provides instantaneous communication for information - information is communicated immediately
- provides general information about the economy and specific information about particular resorces, goods, and services
– all of these advantages of price in a free market result in the efficient allocation and distribution of resorces. this “means that economic resources -land, labor, and capital - will we used for their most valuable purposes. a market system, with its freely changing prices, ensures that resources go to the uses that consumers value most highly”