econ chapter six

What happens to the quantity of lemons demanded as suppliers raise the price?

- As suppliers raise the price the quantity of lemons demanded will decrease

If the supplier is willing to offer lemons at a lower price, what happens to the quantity of lemona demanded?

- If the supplier is willing to offer lemons at a lower price then the quantity of lemons demanded will increase

Can you think of events that would disturb the equilibrium?

- Some events that would disturb the equilibrium would be a change in consumer's income or a change in the price of a substitute

What happiness to the size of the shortage when supplies raise the price?

- The size of the shortage will decrease as suppliers increase the price of lemons

What happens to the size of the surplus as suppliers lower the price of lemons?

- The size of the surplus decrease as suppliers lower the price of lemons

Can you explain why there is no pressure for the equilibrium price to change?

- There is no pressure for equilibrium price to change because there is neither a shortage nor a surplus. At equilibrium everyone wins because the producers are gaining enough revenue and consumers are not over or underpaying for what they need

what is price ceiling?

- a maximum legal selling price above which a product cannot be sold

what is price floor?

- a minimum legal price below which a product cannot be sold

what is disequilibrium?

- a mismatch between quantity demanded and quantity supplied as the market seeks equilibrium; usually temporary, except when government intervenes to set the price

what is equilibrium price?

- a price which equates quantity demanded with quantity supplied - also known as market-clearing price

what is behavioral economics?

- an approach that borrows insights from psychology to help explain economic choices

what is shortage?

- at a given price, the amount by which quantity demanded exceeds quantity supplied; a shortage usually forces the price up

what is surplus?

- at a given price, the amount by which quantity supplied exceeds quantity demanded; a surplus usually forces the price down

what is a decrease in demand?

- consumers are willing and able to buy less of the product at each price

what is an increase in demand?

- consumers are willing and able to buy more of the product at each price

what is productive efficiency?

- occurs when a firm produces at the lowest possible cost per unity

what is allocative efficiency?

- occurs when a firm produces the output most valued by consumers

what is increase in supply?

- producers are willing and able to sell more of the product at each price

what are transaction costs?

- the costs of time and information needed to carry out market exchange

what is a consumer surplus?

- the difference between the most that consumers are willing and able to pay for a given quantity of a good and what they actually pay

what is neuroeconomics?

- the mapping of brain activity while subjects make economic choices to develop better models of economic decision making

what is bounded rationality?

- there are limits to the amount of information people can comprehend and act on

what is market equilibrium?

- when the quantity consumers are willing and able to buy equals the quantity producers are willing and able to sell

what is limited willpower?

- limited self-discipline in following through with decisions that are in one's self-interest, especially one's long-term interest

what is decrease in supply?

- producers are willing and able to sell less of the product at each price