Economics Chapter 6 Test – Flashcards
Flashcard maker : Larry Charles
3 reasons why prices effectively perform the allocation function
1.)Prices favor netierh the producer nor the consumer
2.)Prices are easily understood
3.)Competitive markets find their own prices without interference
2.)Prices are easily understood
3.)Competitive markets find their own prices without interference
The federal minimum wage law demonstrates
a societal choice for economic equity over efficiency
In a market economy, a high price is a signal for
producers to supply more and consumers to buy less
Deficiency payments are part of a federal program to assist
farmers
The theory of competitive pricing
is a set of ideal conditions and outcomes
All the characteristics of allocation by rationing
1.) lack of fairness
2.) high administrative costs
3.) diminished incentive for workers
2.) high administrative costs
3.) diminished incentive for workers
At a given price, a surplus occurs when
the quantity supplies is greater that the quantity demanded
The demand for gold increases when
economic or political conditions are unstable
Prices enable a market economy to adjust to unexpected events by
adjusting consumption and production
If a competitive market is at equilibrium, and if there is a sudden increase in demand, then a temporary
shortage will occur and the price will increase
What is determined by supply and demand?
price, or monetary value of an item
Equilibrium price
the point at which the quantity supplied equals the quantity demanded
Who interferes in the market economy to help achieve the social goals of equity and security
Governments
Governments impose this______ to artificially control how high prices will go
price ceiling
Maximum legal price that can be charged for a product
price ceiling
The government in the 1930’s sought to solve the problem of agricultural surpluses by giving farmers __________ to cover the difference between the market price and target price
Deficiency payment
Serves as signals to both producers and consumers
Price
Signals for busineses to produce more and for consumers to buy less
High Prices
The minimus wage is the _______ for wages in the U.S.
price floor
When producers are left with a _______ of products, they may reduce prices.
surplus
System under which the government or another agency decides everyone’s fair share of a product.
rationing
the minimum wage, the lowest legal price that can be paid to most workers, is an example of this
price floor
partial refund of the original price of a product
rebate
where these occur, resources slowly shift to other markets where equilibrium prices prevail
price ceiling
price that “clears the market”
equilibrium price
unsold product that causes suppliers to reduce their price
surplus
serves as an allocation signal when established by supply and demand
price
loan that has neither a penalty now an obligation to repay if not paid back
nonrecourse loan
condition that leaves suppliers wishing they had more product to sell
shortage
quantity demanded is greater than quantity supplied
shortage
prices are relatively stable,and quantity supplied is equal to quantity demanded
market equilibrium
check sent to producers that makes up the difference between the actual market price and the target price
deficiency payment
monetary value of a product
price
quantity supplied is greater than quantity demanded at a given price
surplus
price that produces neither a surplus nor a shortage
equillibrium price
set of assumptions and/or relationships that can be used to help analyze behavior and predict outcomes
economic model
ticket that entitles the holder to a certin amount of a product
ration coupon
a socially desirable price determined by factors other than the market
target price
maximum legal price that can be charged for a product
price ceiling
situation in which the quantity of output supplied is equal to the quantity demanded
Market equilibrium
Economists use ____ to help analyze behavior and predict outcomes
economic model
perfect competion is ___________ for the theory of competitive pricing to be practical
not necessary
The amount of a price change is affected by the _____ of both the supply and demand curves
elasticity
If the price of an item is too high in a _________, a surplus appears until the price goes down
competitive market
