Economics Chapter 4

Question 0

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 with the system as to what is relatively scarce and what is relatively abundant.

Answer 0

Price system

Question 1

An act of trading, done in an elective basis, in which both parties to the trade expect to be better off after the exchange

Answer 1

Voluntary exchange

Question 2

All of the costs associated with exchange,,including the informational costs of finding out the price and quantity, service record, and durability of a product, plus the cost of contracting and enforcing that contract

Answer 2

Transaction costs

Question 3

When then—– curve shifts outward or inward with an unchanged ——- curve, equilibrium price and quantity increase or decrease, respectively.

Answer 3

Demand. Supply

Question 4

When the —– curve shifts outward and inward given an unchanged ——– curve, equilibrium price moves in the direction opposite to equilibrium quantity.

Answer 4

Supply….. Demand

Question 5

When there is a shift in demand or supply, the new equilibrium price is not obtained ———-. Adjustment takes ——–

Answer 5

Immediately….. Time

Question 6

Government mandated minimum or maximum prices that may be charged for goods or services

Answer 6

Price controls

Question 7

A legal maximum price that may be charged for a particular good or service

Answer 7

Price ceiling

Question 8

A legal minimum price which a good or service may not be sold. Legal minimum wages are an example.

Answer 8

Price floor– typically for wages and agricultural products

Question 9

All methods used to ration scarce goods that are price-controlled. Whenever the price system is not allowed to work, no price rationing devices will evolve to ration the affected goods and services.

Answer 9

Nonprice rationing devices—-coupons during war pay price and give coupon — it was a way of only allowing consumption of specified amounts—random assignment such as popular classes in college

Examples: coupons, first come first served, physical force, political power, and random assignment

Question 10

A market in which goods are traded at prices above their legal maximum prices or in whichever illegal goods are sold.

Answer 10

Black market

Question 11

Governments sometimes impose price controls int he form of —– and price —— and price ——.

Answer 11

Ceilings… Floors

Question 12

An effective price ——- is one that sets the legal price below the market clearing price and is enforced.

Answer 12

Ceiling

Question 13

Effective price ——-lead to no price rationing devices and black markets.

Answer 13

Controls

Question 14

rental prices perform three functions:

Answer 14

1. Allocating existing scarce housing among competing claimants
2. Promoting efficient maintenance of e siting houses and stimulating new housing construction
3. Rationing the sue of existing houses by current demanders

Question 15

Rent —— decrease spending on maintenance of existing ones and also lead to “housing gridlock”.

Answer 15

Controls

Question 16

Ther are numerous ways to avoid rent controls. —— is one of them

Answer 16

Key money

Question 17

With a price —– system, the government sets a minimum price which ,say, qualifying farm products can be sold.

Answer 17

Support

Question 18

Any farmers who cannot sell at that price in the market can”sell” their surplus to the government. The only way a price —– system can survive is for the government or some other entity to buy up the excess quantity supplied at the support price.

Answer 18

Support

Question 19

When a —— is placed on wages at aerate that is above market equilibrium, the result is an excess quantity of labor supplied at that minimum wage.

Answer 19

Floor

Question 20

Quantity restrictions may take the form of ———, which are limits on the quantity of specific foreign goods that can be brought to the U.S. for resale purposes.

Answer 20

Import quota