supply and demand

Question 1

quantity supplied

Answer 1

the amount of a good or service that producers are willing to sell at a specific price

Question 2

supply schedule

Answer 2

a table that shows how much a good or service producers will supply at different prices

Question 3

supply curve

Answer 3

shows the relationship between quantity supplied and price

Question 4

law of supply

Answer 4

all things being equal, there is a positive relationship between the price and quantity of a good

Question 5

surplus

Answer 5

when quantity supplied > quantity demanded, price is above equilibrium level

Question 6

shortage

Answer 6

when quantity demanded > quantity supplied, occurs when price is below its equilibrium level

Question 7

competitive market

Answer 7

a market in which there are many buyers and sellers that are interested in the same good/service, neither buyers or sellers can influence the price or quantity of the goods

Question 8

demand scedule

Answer 8

a table that shows how much of a good/service consumers are willing to buy at different pricepoints

Question 9

demand curve

Answer 9

a graph showing the relationship between the quantity demanded and the price of a good

Question 10

law of demand

Answer 10

the price and quantity demanded of a good/service have an inverse relationship

Question 11

price controls

Answer 11

legal restrictions on how high or low a market price may go

Question 12

How can price ceilings lead to shortagas?

Answer 12

forcing the market price to be below the equilibrium price of a good/service can lead to shortages, because there will be less producers willing to provide the good, but more people wanting to buy the good.

Question 13

Inefficient allocation to consumers

Answer 13

People who want a good badly and are willing to pay a high price for it don’t get it, while people who want a good less urgently and are only willing to pay do get it.

Question 14

How can price ceilings lead to Inefficient allocation to consumers?

Answer 14

by artificially lowering the price of a good/service, people who need a certain good less urgently enter the market to buy a the good/service. This results in Inefficient allocation to consumers.

Question 15

How can price ceilings lead to wasted resources

Answer 15

Price shortages lead to missed opportunities because people spend time and resources seeking out goods/services they want instead of working, having fun, etc,

Question 16

How can price ceilings lead to inefficiently low quality?

Answer 16

Producers sell lower quality goods for lower prices, even though people would rather get higher quality goods for higher prices

Question 17

How can price ceilings lead to Black markets?

Answer 17

Because people’s needs/wants aren’t being met through the market, people seek illegal ways to get what they want

Question 18

Inefficient allocation of sales among sellers

Answer 18

Those who would be selling goods at the lowest price are not always able to sell their goods.

Question 19

How can price floors lead to Inefficiently low quality?

Answer 19

Since the quantity of goods produced is greater then the quantity demanded, the quantity of goods bought and sold is brought below the equilibrium price.

Question 20

How can price floors lead to Inefficiently High quality

Answer 20

Sellers cannot compete through lower prices, so they must increase the quality of their goods to an extent that is not appreciated by sellers. People in reality would prefer lower prices to higher quality, so there is a missed opportunity.

Question 21

quantity control/ quota

Answer 21

upper limit on the quantity of some good that can be bought or sold

Question 22

licences

Answer 22

gives people the right to supply a good/service

Question 23

demand price

Answer 23

the price at which consumers will demand that quantity

Question 24

supply price

Answer 24

the price that producers will supply a certain quantity

Question 25

wedge

Answer 25

the price paid by buyers is higher than that revived by sellers

Question 26

quota rent

Answer 26

the difference between the demand and supply price

Question 27

deadweight loss

Answer 27

the loss in gains due to transactions that don’t occur as a result of artificial manipulation of the market

Question 28

individual consumer surplus

Answer 28

the net gain of an individual buyer from the purchase of the good

(max price they were willing to pay) - (actual price)

Question 29

total consumer surplus

Answer 29

sum of all the individual consumer surpluses

Question 30

total surplus

Answer 30

the sum of the consumer and producer surplus

Question 31

What are indicators of an efficient market?

Answer 31

• there is no way to make some people better off without making some people worse off

Question 32

reallocation of consumption among consumers

Answer 32

in an efficient market everybody who is willing to buy a certain good/service at a certain price has it. If you were to reallocate who has a certain good/service, you would be taking the product away from someone who really wants it and giving it to someone who wants it less. This will lead to a decrease in total consumer surplus surplus

Question 33

relocation of sales among sellers

Answer 33

In an efficient market, everybody who is willing to sell a product at a given price is doing so, By changing who sells a certain product. people, the sale is taken away from someone who is really willing to sell the product, to someone who wants to sell the product at a higher price. This results in a reduction of the total supplier surplus.

Question 34

changes in quantity traded

Answer 34

by manipulating how much of a good/service is traded, total surplus is reduced

Question 35

progressive tax

Answer 35

tax that rises more in proportion to income, high earners pay a higher percent of their income in taxes than low earners

Question 36

regressive tax

Answer 36

a tax that rises less than in proportion to income, higher earners pay a lower percentage of their income compared to low earners

Question 37

proportional tax

Answer 37

a tax that rises in proportion to income, all taxpayers pay the same percentage of their income

Question 38

excise tax

Answer 38

a tax on sales of each unit of a certain good/service sold.

Question 39

tax incidence

Answer 39

the distribution of the tax burden