Price Controls Quiz Flashcards
legal restrictions on how high or low a market price may go
price controls
maximum price sellers are allowed to charge for a good
price ceiling
minimum price buyers are required to pay for a good
price floor
loss in total surplus that occurs whenever an action or policy reduces the quantity transacted below the efficient market equilibrium quantity
deadweight loss
price ceiling inefficiency, some people want the good badly and are willing to pay a high price but don’t get it, someone who cares relatively little and are willing to pay a low price get it
inefficient allocation to consumers
price ceiling inefficiency, people expend money, effort, and time to cope with shortages caused
wasted resources
price ceiling inefficiency, sellers offer lower quality goods at a low price even though buys would prefer a higher quality at a higher price
inefficiently low quality
price ceiling inefficiency, market in which goods or services are bought and sold illegally
black market
legal floor on the wage rate, market price of labor
minimum wage
price floor inefficiency, sellers who are willing to sell at the lowest price are unable to make sales while sales go to sellers who are only willing to sell at a higher price
inefficient allocation of sales among sellers
price floor inefficiency, sellers offer high quality goods at a high price even though buyers would prefer a lower quality at a lower price
inefficiently high quality
price floor inefficiency, unwanted surpluses and wasted time and effort
wasted resources
price floor inefficiency, reduction of the quantity of a good bought and sold below the market equilibrium quantity
inefficiently low quantity
price floor meant to benefit low income farmers who are subject to heavy fluctuation of demand/supply
agriculture price supports
