Chapter 6 Flashcards
price
the monetary value of a product as established by supply and demand
Rationing
a system under which an agency such as the gov’t decides everyone’s fair share
market equilibrium
a situation in which prices are relatively stable, and the quantity of goods or services supplied is equal to the quantity demanded
surplus
a situation in which the quantity supplied is greater than the quantity demanded at a given price
shortage
a situation in which the quantity demanded is greater than the quantity supplied at a given price
equilibrium price
the price that “clears the market” by leaving neither a surplus not a shortage at the end of the trading period
Advantages of Prices in a Competitive Market Economy (4)
- are neutral (favor neither the producer nor the consumer)
- are flexible
- no cost of administration
- are familiar and easily understood
price ceiling
a maximum legal price that can be charged for a product
price floor
lowest legal price that can be paid for a good or service
minimum wage
the lowest legal wage that can be paid to most workers
target price
a price floor for farm products
non-recourse loan
agricultural that carries neither a penalty nor further obligation to repay if not paid back
deficiency payment
cash payment making up the difference between the market price in the target price of an agricultural crop
