Ch4 - Supply and Demand Flashcards
Define demand
The amount of good/services that ppl are willing to buy at different prices.
The guidance system that includes the interaction of supply and demand in the marketplace is called what?
Price system
Define “supply”
The amount of good/services that ppl are willing to sell at different prices.
The location where supply and demand for services/goods operate
Marketplace
Define equilibrium price
The price at which qty demanded equals qty supplied.
Define equilibrium qty.
The qty sold when qty demanded is equal to the qty supplied.
Define “surplus”
When the market price is above the equilibrium price.
Define shortage
When the market price is below the equilibrium price.
An increase in supply does what to equilibrium?
Lowers equilibrium price and raises equilibrium qty.
What happens to equilibrium when supply declines?
Equilibrium price increases and equilibrium qty declines.
Define “price floor”
Lowest price allowed to go to market.
Define price ceiling
Highest price allowed to go to market.
How does the govt keep price floors in effect?
By buying up surpluses
How does the govt enact price ceilings?
By setting price control.
List the two frequently see price controls.
Rent control laws and usury (capping interest rates) laws.
