Econ H T3L7-9 Quizlet

What occurs when demand falls (when a fad passes its peak)?

- The emane curve shifts to the left - Suppliers will respond to decreased demand for the once-fashionable toy by cutting prices on their inventory - Price and quantity supplied slide down the equilibrium point - The end of the fad has restored the original price and quantity supplied

What is a price ceiling and give an example.

A maximum price that can legally be charged for a good or service. Rent control is an example of a price ceiling.

What is a price floor and give example.

A price floor is a minimum price for a good or service. Minimum wage is an example of a price floor.

What is one benefit of a market-based economy A. Diversity of goods and services B. Free Market C. Price Increases D. Price Decreases

Answer—A

What is the quickest way to resolve problems from a supply shock A. Raise prices B. Decrease prices C. Keep them the same D. Move prices

Answer—A

A _____ _____ creates a shortage because suppliers can no longer meet consumer demand A. Supply Demand B. Supply Shock C. Shortage D. Barter

Answer—B

Market in which goods are sold illegally, without regard for government controls on price or quantity A. Free Market B. Black Market C. Market Demand D. Market Curve

Answer—B

Would a Barter system work is a market place? A. No, it is a system that causes the buyer much profit loss B. No; it is a system that would be inconvenient, impractical, and inefficient C. Yes, it is a system that would be convenient, practical, and efficient D. Yes, it is a system that is easy for the buyer and seller to make a profit

Answer—B

What is a direct exchange of one set of good or services for another A. Supply shock B. Rationing C. Barter D. Supply Demand

Answer—C

What is the basis of central planning A. Raising Prices B. Increasing Supply C. Rationing D. Supply Shock

Answer—C

A high price informs what to people A. That they should not invest and the product is not doing well B. There is not a high demand for the product C. Firms will loose more money if they were to increase the supply of it D. Tells firms that people not only want more of that product, but firms can earn more profit

Answer—D

High Price ____; Low Price ______ A. Green Light; Red Light B. Go; Stop C. Red Light; Green Light D. Both A and B

Answer—D

Who benefits from equilibrium price?

Buyers and sellers

How can surplus be eliminated?

By lowering prices

How can shortage be eliminated?

By raising prices

What is Responsive Prices A. Supply goes up or down in response to consumer demand B. Supply goes up or down in response to a consumer demand C. Prices go down in response to a consumer demand D. Prices go up or down in response to consumer demand

Answer—D

What is disequilibrium?

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

When is there a surplus?

When quantity supplied is greater than quantity demanded at a given price

What is surplus & how does the market respond?

When quantity supplied is more than quantity demanded; Decrease prices to reach equilibrium

Where does market equilibrium occur?

At the intersection of a demand curve and a supply curve

Why would demand go down?

Because income goes down

When demand increases, both the __________________________ and the _________________________ also increase.

equilibrium price, equilibrium quantity

What is inventory?

The quantity of goods that a firm has on hand

What does it mean to be at equilibrium?

It means you reach a point where quantity demanded equals quantity supplied

Why is minimum wage a price floor & what is the problem with raising it?

Minimum wage is a price floor because it sets a minimum price employers can pay for one hour of labor. If the minimum wage is set above the market equilibrium wage rate, the demand for workers will go down and less qualified people will be hired.

What is one positive and one negative of government intervention in the rental market in the form of price ceilings?

Rent control could cause there to be a shortage of apartments to people who are willing and able to pay for it. At low rents, landlords will not want to allow tenants. A positive is that some people who are able to rent the apartments will be paying a lower rent. It will benefit some and hurt a lot of others.

What are two outcomes of disequilibrium?

Shortage and surplus

What is shortage & how does the market respond?

Shortage is a situation in which consumers want more of a good or service than producers are willing to make available at a particular price; Raise prices to reach equilibrium

If a supply curve shifts to the left, what changes as well?

The equilibrium price and quantity sold

What is search cost?

The financial and opportunity cost that consumers pay when searching for a good or service

True or False: Equilibrium is a "moving target" that changes as market conditions change.

True