Economics Chapter 6

what does a rapid increase in demand for a good mean for a consumer?

A shortage occurs and the good begins difficult to find.

How does supply shock affect equilibrium price?

An equilibrium is reached to the left because there is a decrease in supply

Why do buyers and sellers conduct business on the black market

Buying and selling on the black market allows avoidance from government controls and consumers can get a rationed product, but at a higher price

How is rationing different from a price based system

Choices were limited, forced to buy only certain amounts of certain products, and wait in hour long lines for basic groceries. A price base system allows you to buy as much as possible for your budget and as often as you'd like

Identify two ways the government can intervene to control prices?

Government set rent control and minimum wage

What is the purpose of minimum wage

Minimum wage is set to protect worker rights and make sure peoples rights aren't violated

what signs indicate a market has a surplus?

Overflowing of shelves and silent cash registers

Describe one argument for and one argument against rent control

Rent laws help the renters with the greatest need however few renters benefit from this due to long waiting lists

what are the signs of a shortage in a market?

Signs of a shortage include empty shelves and long lines. Calling multiple stores in search of a product

black market

a market in which goods are sol illegally without regard for government controls on price or quantity

price ceiling

a maximum price that can legally be charged for a good or sevice

price floor

a minimum price for a good or service

minimum wage

a minimum price that an employer can pay a laborer for one hour of labor

rent control

a price ceiling placed on apartment rent

fad

a product that is popular for a short period of time

supply shock

a sudden shortage of a good

rationing

a system of allocating scarce goods and services using criteria other than price

disequilibrium

any price or quantity not at equilibrium when quantity supplied is not equal to quantity demanded in market

search costs

the financial and opportunity costs that consumers pay when searching for a good or service

equilibrium

the point at which the demand for a product or service is equal to the supply of that product or service

inventory

the quantity of goods that a firm has on hand

shortage

when quantity demanded is more than quantity supplied

surplus

when quantity supplied is more than quantity demanded