Chapter 5 Flashcards
What illustrates demand and supply shifts?
Changes in the determinants of demand and supply
Determinants include factors like consumer preferences, income levels, and production costs.
What happens during simultaneous changes in demand and supply?
Both the demand and supply curves shift at the same time
This can lead to varying effects on equilibrium price and quantity.
What is a price floor?
A minimum price set by the government
Price floors can lead to surpluses when set above equilibrium price.
What is a price ceiling?
A maximum price set by the government
Price ceilings can lead to shortages when set below equilibrium price.
How do you calculate surplus?
Surplus = Quantity supplied - Quantity demanded
Surplus occurs when supply exceeds demand at a given price.
How do you calculate shortages?
Shortage = Quantity demanded - Quantity supplied
Shortages occur when demand exceeds supply at a given price.
What are welfare costs?
The loss of economic efficiency when equilibrium is not achieved
Welfare costs can arise from price floors and ceilings.
What is the effect of government intervention on agricultural prices?
It can stabilize prices or lead to distortions
Government policies may include subsidies or price controls.
What are self-fulfilling expectations?
Expectations that influence behavior and lead to outcomes that confirm those expectations
In economics, they can affect demand and supply dynamics.
