Prices

Question 1

Equilibrium

Answer 1

Point at which quantity demanded and quantity supplied are equal

Question 2

Disequilibrium

Answer 2

Describes any price or quantity not at equilibrium; when quantity supplied is not equal to quantity demanded in a market

Question 3

Price ceiling

Answer 3

Maximum price that can legally be charged for a good or service

Question 4

Price floor

Answer 4

Minimum price for a good or service

Question 5

Rent control

Answer 5

Price ceiling placed on rent

Question 6

Minimum wage

Answer 6

Minimum price that an employer can pay a worker for one hour of labor

Question 7

Surplus

Answer 7

Situation in which quantity supplied is greater than quantity demanded; also known as excss supply

Question 8

Shortage

Answer 8

Situation in which quantity demanded is greater than quantity supplied; also known as excess demand

Question 9

Supply Shock

Answer 9

Sudden shortage of a good

Question 10

Rationing

Answer 10

System of allocating scarce goods and services using criteria other than price

Question 11

Black Market

Answer 11

Market in which goods are sold illegaly

Question 12

Spillover Costs

Answer 12

Costs of production that affect people who have no control over how much of a good is produced

Question 13

4 Advantages of Prices

Answer 13

Prices as an Incentive; Prices as Signals; Flexibility; Price System is “Free”

Question 14

3 Market Problems

Answer 14

Imperfect Competition; Spillover Costs; Imperfect Information