economics chapter 6

How does the concept of market equilibrium reflect the interaction of producers and consumers in a market?

As buyers and sellers interact in a market, the market will move towards market equilibrium in which the quantity demanded at a particular price is equal to the quantity supplied.

Why are surpluses and shortages examples of disequilibrium?

Because in surpluses and shortages the quantity demanded does not equal quantity supplied and this leads to disequilibrium. In surpluses that the quantity supplied is greater than quantity demanded in shortages the quantity demanded is greater than quantity supplied

When do prices serve as signals and incentives for producers to enter a market?

Prices serve as a signal about whether it is a good idea to enter the market. Rising prices motivates producers to enter a market. Falling prices motivate producers to leave a market.

What motivates producers and consumers in the black market?

Producers are motivated by profits. The consumers are motivated to purchase goods and services they want.

is a government system for allocating goods and services using criteria other than price.

rationing

What is the usual result of a price floor?

That producers might produce an abundance of goods It terms of minimum wage, it might make producers hire less workers.

How are producers and consumers equally involved in the price system?

The prices motivates the producers and consumers in different ways. Producers want to sell at high prices and consumers want to buy at low prices. In the price system, incentives encourage producers and consumers to act in their best interest.

Why is the market always moving towards equilibrium?

The relationships between changes in demand or supply lead to changes in the equilibrium price. If demand decreases or supply increases then the equilibrium price will fall. IF demand increased or supply decreases then the equilibrium price will rise.

involves illegal buying or selling in violation of price controls or rationing

black market

occurs when producers sell products at lower prices to lure customers away from rival producers, while still making a profit.

competitive pricing

Occurs when quantity demanded and quantity supplied are not in balance.

disequilibrium

the price at which the quantity demanded equals the quantity of workers supplied; the market price for labor.

equilibrium price

encourages people to act in certain ways

incentive

occurs when the quantity demanded and the quantity supplied at a particular price are equal

market equilibrium

a legal minimum amount that an employer must pay for one hour of work.

minimum wage

is the legal maximum price that sellers may charge for a product

price ceiling

a legal minimum price that buyers must pay for a product

price floor

is the result of quantity demanded being greater than the quantity supplied.

shortage

Is the result of quantity supplied being greater than the quantity demanded.

surplus