Chapter 4 - Demand & Supply Analysis Flashcards
an act of trading between individuals in the price system
voluntary exchange
economic system in which relative prices are constantly changing to reflect changes in supply and demand
price system/market system
all costs associated with exchange
transaction costs
reduce transaction costs by providing information to buyers and sellers
middlemen
changes in supply and demand create a blank
disequilibrium
increase in demand blanks equilibrium price and quantity
increases
decrease in demand blanks equilibrium price and quantity
decrease
this may take the form of subtle adjustments such as hidden payments, quality changes and may not reach equilibrium right away
price flexibility
markets eventually blank but it can happen at different blank due to outside factors like energy shocks, labor strikes, severe weather
adjust, speeds
synchronization of decision of buyers and sellers that leads to equilibrium is called the blank
rationing function of prices
two methods of non price rationing
wait in line, coupons and random assignment
government-mandated minimum or maximum prices
price control
a legal maximum price
price ceiling
a legal minimum price
price floor
all methods used to ration scarce goods that are price controlled
non price rationing devices
a market in which price controlled goods are sold at an illegally high price
black market
government chooses a price floor for a product and then acts to ensure that the price of the product never falls below the support level
support price
a wage floor, legislated by the governemnt, setting the lowest hourly wage rate that firms may legally pay workers
minimum wage
some commodities cannot be purchased at all legally; others require a license
government prohibitions and licensing requirements
supply restriction that prohibits the importation of more than a specified quantity of a particular good
import quota
