Chapter 6 - Price: Supply and Demand Together

Question 1

Surplus

Answer 1

The condition in which the Quantity Supplied of a good is greater than the Quantity Demanded. Surpluses occur only at prices ABOVE Equilibrium Price

Question 2

Shortage

Answer 2

The condition in which the Quantity Demanded of a good is greater than the Quantity Demanded. Shortages occur only at prices BELOW equilibrium price

Question 3

Equilibrium

Answer 3

The point at which the quantity of a good that buyers are willing and able to pay is equal to the quantity that sellers are willing and able to produce and offer for sale. Supply and Demand Curve intersect at this point.

Question 4

Inventory

Answer 4

The stock of goods that a business or store has on hand.

Question 5

Price Ceiling

Answer 5

A legislated price—set lower than the equilibrium price—above which buyers and sellers cannot legally buy and sell a good.

Question 6

Price Floor

Answer 6

A legislated price—set higher than the equilibrium price—below which buyers and sellers cannot legally buy and sell a good.