Equilibrium

Question 1

equilibrium price

Answer 1

the price supplied and demanded at the equilibrium

Question 2

equilibrium quantity

Answer 2

The quantity supplied and demanded at equilibrium

Question 3

market equilibrium

Answer 3

when the market supply and demand are balanced (every seller can find a buyer, and every buyer can find a seller)

Question 4

price controls

Answer 4

a minimum or maximum price set by the government

Question 5

price ceiling

Answer 5

A government mandated maximum price in a market

Question 6

price floor

Answer 6

a government mandated minimum price in a market

Question 7

binding price floor

Answer 7

occurs when the price floor is set above the equilibrium price

Question 8

binding price ceiling

Answer 8

occurs when the price ceiling is set below the equilibrium price

Question 9

quota

Answer 9

a government regulation on the amount of goods that can be exchanged in a market

Question 10

quota limit

Answer 10

the maximum amount of goods that can be exchanged under a quota

Question 11

When price is below the equilibrium it will cause a..

Answer 11

shortage

Question 12

shortages causes the price to

Answer 12

rise

Question 13

When price is above the equilibrium it will cause a..

Answer 13

surplus

Question 14

surpluses cause the price to..

Answer 14

fall

Question 15

An increase in demand leads to a

Answer 15

higher price and higher quantity

Question 17

A decrease in demand leads to a

Answer 17

lower price and lower quantity

Question 18

3-step recipe for predicting market outcomes

Answer 18

1. determine which curve is shifting
2. determine if its an increase or decrease
3. determine how prices & quantities change the equilibrium

Question 18

An increase in supply leads to

Answer 18

lower prices and a larger quantity

Question 18

an decrease in supply leads to

Answer 18

higher prices and lower quantity

Question 19

Deadweight loss

Answer 19

The lost surplus from an inefficient outcome

Question 20

consumer surplus

Answer 20

when consumers buy goods for cheaper than their marginal benefit (CS=MB-P)

Question 21

Producer Surplus

Answer 21

when producers sell goods at a higher price than their marginal cost (PS=P-MC)

Question 22

Economic surplus/Total surplus

Answer 22

Consumer surplus + producer surplus OR marginal benefit - marginal cost

Question 23

Deadweight loss formula

Answer 23

TS*-TS OR calculate the area of the triangle that represent DWL on the graph

Question 24

other sources of inefficiency from price controls:

Answer 24

-inefficient allocation of units among firms and consumers
-wasted time/resources
-inefficient quality