chapter 4

Question 1

price signals

Answer 1

basis of today economics, give us information

Question 2

price controls

Answer 2

legal restrictions on how high or low the price should be
price floors or ceilings

Question 3

price ceiling

Answer 3

maximum price sellers are allowed to charge for a good or service,
below the equilibrium price to be binding
supply is less than demand

Question 4

price ceilings create inefficiency, how?

Answer 4

low quantity (of good supplied)
misallocation
wasted resources of the buyers
low quality
black market

Question 5

price floors

Answer 5

minimum price above the equilibrium price
more supply than demand

Question 6

price floors create inefficiency, how?

Answer 6

low quantity (of good demanded)
misallocation of sales
waste of resources
high-quality level
illegal activity

Question 7

quantity control or quota

Answer 7

upper limit on the quantity of some good that can be bought or sold
could happen through licenses too

Question 8

quota rent

Answer 8

the wedge drawn between the price of the suppliers and the price that consumers are gonna pay (supply price - demand price)