Topic 3 - Markets Flashcards
1
Q
What does price elasticity of supply measure?
A
The responsiveness of quantity changes to a change in price.
2
Q
The inability of the price mechanism to price public goods is an example of which of the following? (A) Social costs (B) Adverse spillovers (C) Market failure (D) Negative externalities
A
(C) Market failure
3
Q
State the circumstances of supply and demand, in terms of price, when a price ceiling is imposed.
A
Minimum price set by the government, so the price of a G/S does not fall below a specified level.
Effect: Shortage of supply in excess demand = Disequilibrium.
