Chapter 4 Definitions Flashcards
Price ceilings, floors, black market
An economic system in which relative prices are constantly changing to reflect changes in supply and demand for different commodities. The price of those commodities are signals to everyone within the system as to what is relatively scarce and what is relatively abundant
Price system
An act of trading, one on a mutually agreed basis, in which both parties to the trade expect to be better off after the exchange
Voluntary Exchange
All of the costs associated with exchange, including the informational costs of finding out the price and quality, service record, and durability of a product, plus the cost of contracting and enforcing that contract
Transaction costs
Companies whose services link people to other individuals who share their interest or who seek to buy firms’ products, often via networks that the companies operate
Platform Firms
Government-mandated minimum or maximum prices that may be charged for goods and services
Price controls
A legal maximum price that may be charged for a particular good or service
Price Ceiling
A legal minimum price below which a good or service may not be sold. Legal minimum wages are an example
Price Floor
All methods used to ration scarce goods that are price-controlled. Whenever the price system is not allowed to work, nonprice rationing devices will evolve to ration the affected goods and services
Nonprice rationing devices
A market in which goods are traded at prices above their legal maximum prices or in which illegal goods are sold
Black market
Price ceiling on rents
Rent control
A wage floor, legislated by government, setting the lowest hourly rate that firms may legally pay workers
Minimum Wage
A physical supply restriction on imports of a particular good, such as sugar. Foreign exporters are unable to sell in the United States more than the quantity specified in the import quota
Import quota
